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Cash Back vs Low Interest Calculator

Dealers often offer either a cash rebate or a low finance rate, not both. Compare the monthly payment and total cost of each offer.

After down payment and trade-in

Dealer discount if you take the standard rate

%
%
months

Cheaper offer

Low rate, saves 4,031.29

Payment with cash back

2,165.27

Payment at low rate

2,098.09

Total with cash back

129,916.43

Total at low rate

125,885.14

Totals compare what you pay over the term. If you would pay cash instead of financing, the cash back is simply a discount.

Formula with your numbers

  • Cash back P = 120,000.00 − 8,000.00 at 6%, n = 60 → 2,165.27 × 60 = 129,916.43
  • Low rate P = 120,000.00 at 1.9%, n = 60 → 2,098.09 × 60 = 125,885.14

Quick answer: On 120,000 over 60 months, taking 8,000 cash back at 6% costs 129,916.43 in total, while 1.9% with no cash back costs 125,885.14, so the low rate saves 4,031.29.

How it's calculated

Cash back offer: you finance the price minus the rebate at the lender's normal rate. Low-rate offer: you finance the full price at the promotional rate. Each payment uses M = P·r ÷ (1 − (1 + r)^−n).

The offer with the lower total of payments over the term is cheaper. A bigger rebate, a higher normal rate or a shorter term changes the answer, so compare with your own numbers.

Gulf dealers' finance deals are often quoted as flat rates; convert them with the loan and Murabaha calculator before entering them here. To see the full car payment with VAT and a trade-in, use the car loan calculator.

Worked examples

  • Cash back: 112,000 at 6%, 60 months: M = 2,165.27, total 129,916.43
  • Low rate: 120,000 at 1.9%, 60 months: M = 2,098.09, total 125,885.14

Frequently asked questions

Is 0% finance always better?

No. If the rebate is large and your normal rate is low, the cash back can cost less overall. Run both with your numbers.

What rate should I enter with the cash back?

The rate your bank or the dealer's lender would charge without the promotion. Get a pre-approval quote if you can.

What if I pay cash?

Then take the cash back: it is a straight discount and the low rate is worth nothing to you.

Why does a longer term change the answer?

The low rate saves interest in every month, so its advantage tends to grow with a longer term. Short loans often favour the cash back.

What if I plan to settle the loan early?

The cash back usually gains, because you get it at once while the low rate's saving stops when the loan ends. Check for early settlement fees too.

Does this work for Islamic finance offers?

Yes. Enter the profit rate as the rate, as long as it is a reducing rate and not a flat one.