Purchase Price: the advertised purchase price of the automobile, taking into account any discounts except for the rebate you are considering.
Trade Allowance: the value of the "trade-in" you are getting from the dealer for your old car. If you aren't doing a trade-in, set the value to "0."
Down Payment: Enter the down payment as a whole dollar amount, including any fees you have to pay at the time you buy the car. If you do not have to make a down payment, enter "0."
Rebate: Enter the amount of the rebate.
Loan Term (months): Enter the auto loan's term, the number of months you will be making loan payments.
Interest Rate: Enter the interest rate of the car loan as a percentage. You can use up to two decimal places.
Low Interest Rate: Enter the lower promotional interest rate as a percentage. You can use up to two decimal places.
Sales Tax Rate: Enter the state sales tax as a percentage. If your state has no sales tax, enter "0."
Does your state allow deductions…: Check your state's motor vehicle registry or department of revenue's website for this information.
Does your state calculate sales tax before the rebate? Check your state's department of revenue's website for this information.
Auto Promotional Financing and Rebate Deals Explained
Buying a car is rarely as simple as buying a washing machine or a pair of shoes. Car dealers seem reluctant to tell you a firm flat price upfront. There are often sales, promotional interest rates, no-interest periods, and rebates. This pricing situation is most common when the car is a Ford, GM, Chrysler, other new domestic car, or any used car. The European, Korean, and Japanese automakers are much less fond of promotions and so their dealers are less likely to offer them.
All this funny pricing makes a lot of people uncomfortable—and it should. There's only one reason automakers and auto dealers make their pricing schemes so elaborate with promotions and special offers. Ultimately, they make more money that way. The array of price factors makes it much easier for the dealers to shuffle the numbers in their favor, letting you walk away thinking you've gotten a good deal, while you've actually paid more.
Dealers' Loans vs. Alternate Sources of Financing
When choosing between a rebate and a low-interest dealer financing offer, it's important to make sure the dealers' auto loan interest rates really are competitive. Oftentimes the loans offered by car dealers, especially used car dealers, charge a higher interest rate than those offered by banks, credit unions, and loan companies.
Meanwhile, auto loans will always have fairly high interest—normally much higher than you could get on a typical investment. Your best bet is to avoid taking out an auto loan in the first place, if at all possible. If you don't have the savings available to pay for your car, one alternative may be to take out a home equity loan. A home equity loan typically has a much lower interest rate than an auto loan. On the downside, a home equity loan also generally has higher fees. You can use the home equity loan vs. auto loan calculator to see which is better yourself.