Comparing rebate vs low-interest financing for cars

When you go out to buy a car, there are several decisions that you need to make. The most important one is the make and model that you want to buy. The presence of numerous car manufacturing brands in India makes your choice even more challenging.

To attract car buyers like you, auto manufacturers and dealers offer lucrative deals or incentives on new cars. The two most common ones are “rebates on cars’ prices” and “low-interest financing”. You can save a significant chunk of money by availing these incentives while buying your car.

Rebates or low-interest financing – Which one should you choose?

The problem with the two most common forms of car incentives offered by automobile dealers is that most car manufacturers allow only one deal per purchase. You must choose whether you want a rebate on your car’s price or low-interest financing.

To make the right decision, you should evaluate and compare the financial benefits you will get. A thorough comparison of rebate vs low-interest financing can help.

Understand the two terms accurately

Rebate refers to the one-time discount given by the manufacturer or dealer on the total purchase price of your vehicle. The rebate discount may vary as per the make and model, but it usually ranges between Rs 5,000 and Rs 50,000.

On the other hand, low-interest financing means getting a car loan at reduced interest rates. Car manufacturers have tie-ups with banks and NBFCs; hence, they offer low-interest car loans on buying a car from a specific company. Some lenders even allow up to zero percent financing on new cars.

Do your calculations

Calculate to find out which deal can provide you with maximum financial benefit. While rebates on new cars can lower your upfront price of the vehicle, low-interest financing will decrease your monthly EMIs if you purchase the car on loan.

If you are getting low-interest financing, you need to calculate how much it will benefit you. For example, while buying a car worth Rs. 10 lakhs, the dealer offers you either Rs 25,000 upfront rebate or financing at an 8% interest rate instead of 9%.

Considering that you’re availing of a loan of Rs 8 lakhs for five years, the total interest on your loan at 9% would be Rs 1,96,401, and at 8% would be Rs 1,73,267. The difference comes to Rs. 23,134. So, in this case, availing of the rebate would be a better option.

To sum It up

Both rebates and low-interest financing allow you to save money while buying a new car. But when you have to choose between the two, you must calculate and compare the financial benefits you would be getting.

You can also opt for the rebate and look for the car loan options at the best interest rates. For example, you can avail of a car loan from IDFC FIRST Bank at a floating rate of interest and convenient tenure.

Disclaimer

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