Dear Driving for Dollars,

With automakers offering super-low interest rates, it seems like taking the “cash back,” or the thousands of dollars in manufacturer’s and dealer rebates, is never a better deal. How do I know when it’s better to take the cash discount and get my own financing instead of using the manufacturer’s financing arm or lending partners?

— Cash Hungry

Dear Cash Hungry,

You are right to point out that most manufacturers’ cash rebates and financing incentives usually can’t be combined, so you’ll need to decide between the two. Many consumers won’t qualify for the lowest interest rate that the manufacturer is offering unless they have great credit. Most also forget they don’t need to use the lender (or lenders) that are offered through the dealer. It’s perfectly acceptable to use any lender you choose, and quite often, credit unions have some of the best auto loan rates available.

Often, combining the manufacturer’s rebate with a higher interest-rate loan means a lower monthly payment as well as a lower cost overall. You can do some easy calculations for getting the cash back versus a lower interest rate by using Bankrate’s “Car loan comparison calculator” to see what makes the most financial sense. Use this tool and do the calculation with several interest rates if you are unsure for what rate you’ll qualify.

If you have a car question, e-mail it to us at Driving for Dollars.

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