Lease or Rebate or Zero APR? Which is Best?

Which is Best — Special Lease, Rebate, or 0% APR Loan?

New cars often come with multiple incentive offers from car companies

When car manufacturers offer incentives on brand new cars, it often comes in multiple forms between which customers much choose since only one can be used. For example, rebates typically don’t apply to special leases because those leases usually include already discounted prices. And a rebate cannot be used if a low-interest or zero-interest loan is chosen.

So which is the better deal?

The better deal, of course, depends on the details of the “offers.”

If the choice is between a lease and a purchase with a loan, a lease will always — always — produce the lowest monthly payments, given the same car, same price, same term, same everything — even when compared to a 0% APR loan rate

Let’s take a look at an example for a $25,000 car for both a lease and a loan, both at 4.5% finance rate, as well as a 0% loan rate. Assume a 36 month lease and 36 month loan.

Lease (assuming 50% residual value) – $417.53 monthly payment

Loan (with $2000 rebate) – $684.18 monthly payment

Loan (0% APR loan rate) – $694.44 monthly payment

We can conclude a number of things from the above calculations:

That leasing will always produce the lowest payments, even if the lease is not a special “subvented” deal from the manufacturer — that even a normal lease, even one that is not a particularly good deal, will produce lower payments. Of course, the better the lease deal, the greater the difference when compared to a loan deal of any kind.

Assuming a lease is not of interest for whatever reason, then the question comes down to, which is better, a rebate or zero percent loan deal?

Of course, if the vehicle will be purchased with cash, the rebate is obviously the best (only) choice. However, if it’s to be purchased with a loan, is it better to go with a rebate or no-interest loan, assuming both are offered?

As you can see in our example above, a loan at 4.5% but with a $2000 rebate creates a lower payment than a 0% loan deal. Clearly, the larger the rebate, the better the rebate option becomes. A good rule of thumb: If the rebate being offered is $2000 or more, go with the rebate option. Otherwise, go with the no-interest loan.

Other factors may be important

Having said the above, there are a couple of other considerations that might affect your decision.

First, if you are short on down payment cash, the rebate option may be best because rebate credit is used like a down payment for you. Without a down payment, you may not be able to get a special lease deal or zero-interest loan deal.

Second, if you have poor credit, you may not qualify for either a special lease deal or a 0% loan, leaving the rebate option as your only choice. You should know your current credit score before visiting a dealer and discussing these kinds of deals.

You can always get your most recent credit report and credit score online. Get your Experian Credit Report FREE at
 If you spot any mistakes or old outdated information that is negatively affecting your reports, be sure to contact the offending credit company immediately.


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