With sales remaining sluggish, many automakers continue to offer generous car financing deals such as a rebate or zero percent interest. As a consumer, how do you decide which car financing incentive will save you more over the life of the loan?

The rebate — serving as all or part of a down payment — and zero percent financing will reduce the loan’s monthly payments. But while it’s true one will usually be better than the other, there’s no hard-and-fast rule which one is best in all situations.

Using someone else’s money for free always seems like a smart move. Even if you intend to pay cash for a vehicle, it makes sense to put your money into some sort of interest-earning investment while taking advantage of a zero percent manufacturer’s offer to pay for your vehicle.

Things become less clear for consumers who must finance, and then have to make the decision: rebate or zero percent financing? First, understand that not everyone can take advantage of a zero percent financing offer.

According to GMAC and Ford Motor Credit, neither has a set formula for qualifying an applicant for a zero percent car financing deal, but a number of conditions must be met to qualify for zero percent or any reduced-rate financing. Generally, you must:

  • Use the captive credit company of the manufacturer (for example, GMAC for GM).
  • Have a good credit score.
  • Have solid credit history.
  • Make a solid down payment of either cash or a high-equity trade-in.

Even if you don’t qualify for zero percent financing, all is not necessarily lost. Some incentive offers include a range of reduced interest rates beginning at zero percent that increase depending on the length of the loan and the qualifications of the borrower.

To help you navigate the numbers, Bankrate.com has a handy Car rebate vs. low-interest calculator to help you make the choice. In fact, this calculator is invaluable in making the decision between a rebate and any reduced interest rate offer.

To obtain an accurate picture of the savings each incentive represents, the calculator requires:

  • Vehicle total purchase price before tax.
  • Amount of your down payment.
  • Amount of your trade-in allowance (if trading in a vehicle).
  • Amount owed on trade (if trading in a vehicle).
  • Your state’s vehicle sales tax rate.
  • Amount of the manufacturer’s rebate.
  • Current traditional finance percentage rate (available with Bankrate’s Find an auto loan rate tool).
  • Reduced finance percentage rate if larger than zero.

Determining whether the rebate or the financing deal offers the greatest savings is as simple as inserting the above information into the calculator’s appropriate blanks. It will crunch the numbers and display the comparative loan total amounts and the total payment amounts for each, as well as the difference in savings.

You can find an up-to-date list of all manufacturer Incentives and Rebates at Edmunds.com.