Take the rebate or zero percent auto loan?

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As dilemmas go, this is one of the least painful ones imaginable: For some car buyers, their decision will be whether to take a rebate or sign on for a zero percent auto loan.

Neither is bad, but that doesn’t mean they’re equally good for everyone. When weighing the difference between zero percent financing and a rebate, first identify their differences and then figure out which is best suited to your needs.

Zero percent financing reduces the monthly payments on an auto loan since you’re not paying interest. But a large rebate can provide a big portion — or even all — of a down payment.

Can you get zero percent?

First, an important qualifier: Not everyone qualifies for zero percent financing on an auto loan. There is no set formula for approval, according to Ford Motor Credit and GMAC. Those approved for zero percent often have good credit, a good credit history and are putting a chunk of cash down.

Zero percent is a great option if you meet the test and have to finance. Even if you don’t need to finance, zero percent financing on auto loans can allow you to invest your cash while making interest-free monthly car payments. To determine what your monthly auto loan payments will be, use Bankrate’s auto loan calculator.

Pay down with your rebate

If you are eligible for a rebate, you also will need to weigh your options.

If you go into the showroom with a large down payment in hand, you can always take the rebate in cash. But for most people, the rebate will be credited toward the purchase price and might even be large enough to cover the entire down payment. The vehicle price, the amount of the rebate and the interest rate you’ll be paying are factors you need to consider when making your decision. Use Bankrate’s auto rebate vs. low-interest financing calculator to determine which option is best for you.

Other options for auto loans

There is a range of incentives for low-interest rate auto loans and financing. Compare auto rates in your area with Bankrate’s auto loan comparison tool.