When I’m offered a rebate vs. 0%, how do I know which one to choose?

The first part of the answer is that it will depend on your individual situation. If you have great credit, you may have more options. 0% offers are typically given to “well-qualified buyers”, which translates to “buyers with excellent credit”. If you have less than perfect credit, the 0% may not be an option whereas the rebate is available regardless of credit.

Secondly, it depends on whether a lower payment or greater savings is more important to you. If payment is your primary concern, 0% may not be the way to go. It is often based on short-term financing, such as 36 months, which could lead to a higher payment. If your goal is overall long-term savings, 0% may be your best choice. This will all depend on how much you are financing and the amount of the rebate offer.


0%

Rebate

  •  $20,000 for 60 months
  • Interest: 0%
  • Monthly payment: $334
  • Total interest paid: $0

  •  $20,000 for 60 months
  • Interest: 3.75%
  • Monthly payment: $321
  • Rebate: $2500
  • Loan balance: $17,500
  • Total interest paid: $1,714.95

 

In this instance, taking the rebate and the 60 month financing at 3.75% would result in the estimated savings of $786 over the life of the loan. 


0%

Rebate

  • $30,000 for 36 months
  • Interest: 0%
  • Monthly payment: $833

  • $27,500 for 60 months
  • Rebate: $2500
  • Interest: 3.75%
  • Monthly payment: $550
  • Total interest: $2,940

 

So in this case, if a lower monthly payment is your goal, taking the rebate is going to cost you an additional $440 however it will save on your monthly budget.

If I elect the 0% financing option, what are some of the things I should look out for?

First and foremost, always read the fine print. In many circumstances, one late payment can result in a rate increase that may be higher than you may have gotten with the rebate.

Depending on your credit, you may find that you are not eligible for 0%. It is often reserved for those with close to perfect credit. If you have had even one mistake, you may not qualify.

0% is often offered for short terms, such as 36 or 48 months. How will this impact your overall budget? Is your monthly budget more important than the long-term savings?