How this calculator works
All three paths start with the same cash and end owning the same car, so the comparison is the cash left at the end of the loan term. Paying cash spends the price less the rebate and invests the rest. Financing at the promotional rate gives up the rebate, invests all the cash and pays the loan from it each month; financing at the standard rate takes the rebate, borrows the lower price, and does the same. The invested balance grows at the after-tax return entered.
The breakeven return is the after-tax return at which the better financing option leaves the same cash as paying cash. The implied rate prices the promotional offer: it is the interest rate at which the promotional payments are worth the cash price after the rebate, because choosing the low rate means paying the full price.
Worked example
With the defaults, paying cash costs $33,500 after the $2,500 rebate and leaves $2,500, which grows to $3,115 over 60 months at 4.5%. Financing $36,000 at 0% costs $600 a month; drawn from $36,000 invested at 4.5%, that leaves $4,667 at the end. Financing $33,500 at 6.9% with the rebate costs $661.76 a month and leaves $530.
The 0% offer is the best of the three, ahead of paying cash by $1,552. Giving up the $2,500 rebate makes the 0% loan equivalent to borrowing $33,500 at 2.87%, so financing beats paying cash whenever the cash can earn more than 2.91% after tax.
How to read the result
The breakeven return is the figure to compare with what the cash can actually earn after tax over the loan term. A savings account or Treasury bills give a fairly certain return; stocks can average more but can also be lower over five years, so a breakeven only a little below the expected stock return is a thin margin.
The rebate moves the answer most. At $2,500 the 0% offer is equivalent to 2.87%; at $5,000 it is equivalent to 6.05%, and paying cash leaves $6,231 against $4,667 for the 0% path, so paying cash and taking the rebate leaves the most. The standard APR matters only for the rebate-with-financing path, which at 6.9% costs $6,206 of interest.
Assumptions and sources
- Federal Trade Commission, Financing or leasing a car — manufacturer incentives as lower finance rates or cash back; discounted rates not negotiable and limited by credit history; what APR measures
- Consumer Financial Protection Bureau, What is included in the monthly auto loan payment? — principal and interest in an auto loan payment
Checked October 2026. Whether the rebate reduces sales tax differs by state and is not modelled; the return is an input, not a market rate.
Common mistakes
- Treating 0% as free. When taking the low rate means giving up a rebate, the rebate is its price; at the defaults that makes the 0% loan cost about 2.87% a year.
- Comparing the APR with a pre-tax return. Interest saved is not taxed and investment earnings usually are; the comparison has to be after tax.
- Assuming the promotional rate is available. The FTC notes these discounted rates generally aren’t negotiable and may be limited by credit history.
- Draining emergency savings to pay cash. The calculation counts only the return on the cash, not the cost of having none left for an emergency.
Frequently Asked Questions
Is 0% APR or the rebate better?
Compare the rate the 0% offer implies with the standard rate available with the rebate. Here, giving up $2,500 on a $36,000 car over 60 months is like paying 2.87%; a standard loan at 6.9% with the rebate costs more, so the 0% offer leaves more cash.
Is it better to finance a car when paying cash is possible?
It comes out ahead when the cash left invested earns more after tax than the loan effectively costs. With the defaults, financing at 0% comes out ahead at any after-tax return above 2.91%.
What return is needed to make financing worthwhile?
The breakeven return on this page: the after-tax rate at which financing and paying cash end with the same cash. It rises with the rebate and the loan rate.