Rebate vs. Dealer Financing Basics

So buying a new car is on your mind, but after shopping around a bit you find yourself confused by whether you should take a rebate or dealer financing. Unfortunately, it’s usually not possible to take advantage of the two simultaneously, which means you have to choose. But while both will ensure you get the best car loan possible, most experts would point you in the direction of taking the rebate.

What’s the Deal with Dealer Financing?

If you’ve noticed an ad for 0% financing at a dealership, you may have been tempted to run straight to them to take advantage of a no-interest deal. However, don’t run too fast, because while it’s a good deal to take advantage of, there are usually some stipulations that make the deal not as great as you once thought it was.


For example, most dealerships that offer extremely low dealer financing only offer the rate for a specified period of time. In other words, the deal may last for three years, after which you’re introduced to a much higher rate. Also, you may be forced into taking a certain type of vehicle and putting down a specific down payment. And don’t forget that it’s not easy to take advantage of dealer financing. Usually, dealerships only offer this type of deal to a borrower with stellar credit.

Why the Rebate is Usually a Better Choice

Because so much about dealer financing can be unappealing, you may want to consider taking a rebate. One reason is that it normally does not require great credit – anyone can take advantage of it. Also, it is available to you whether you choose to finance with the dealership or go with an outside lending establishment. If you choose an outside lending establishment, you can receive a lower interest rate and also utilize the rebate, saving you tons in the long-run. The one stipulation to consider is a specified down payment amount. But since this is something you’ll have to contend with in dealer financing, you really don’t lose here.

In the end, choosing between the rebate and dealer financing is not a decision to be made in haste. So before saying yes to one or the other, shop around to see just what’s out there. Then, calculate which one you’ll save the most on, including your short term capital needs.