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Low APR vs. Rebates: Which Is Better?

Low APR vs. Rebates: Which Is Better?
Written by Publishing Team

If you’re looking to buy a new car or truck, manufacturer discounts can help lower your purchase costs. However, promotional financing deals can provide significant savings as well. The downside is that these incentives usually cannot be combined. As a result, the deal you choose may affect your budget for years to come.

For example, GM Finance is currently offering a 0% APR 72-month financing deal on the Chevrolet Trax. Your alternative is a $500 cash incentive. With the discount, a six-year loan on an SUV of $25,000 with an interest rate of 4% would cost approximately $27,598 excluding taxes and fees. That’s roughly $2,600 spent on interest.

For comparison, a six-year loan at 0% would cost $25,000. Although you’ll miss out on a $500 upfront discount, the total cost is lower. Additionally, you may get a lower monthly payment. With 0% APR financing, it would be around $347 per month. With the discount, the estimated monthly payment comes out to $383.

Longer loans can sometimes make great deals, but they can also have downsides. If you expect to sell your car within two years, an 84-month car loan may not be a good idea. That’s because owning a car worth less than you owe due to depreciation can lead to negative equity that may not always be easy to get rid of.

Having said that, financing may not always be the best deal. For example, Chevy sometimes offers employee pricing deals that promise more than $10,000 in savings on select models. We recommend considering the pros and cons of rebates against a lower APR before making a decision based on a realistic expectation of the rates for which you are eligible.

To take the guesswork out, you may want to get pre-approved for a car loan from a bank or credit union. Since the best rates are limited to those with first-class credit, you may end up with a higher interest rate. Buyers with mortgage credit may want to find a car dealer in their area who specializes in helping customers with bad credit.

Cars with the biggest discounts

Pictured: 2022 Chevrolet Trax

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