I wanted a vehicle that didn’t have a ton of miles on it, but was not set on having to buy new.  I understand that the value of a car depreciates so quickly that it’s really not considered a “good investment” by any means.  But I figure if I can get 10 years out of this car like I did my last car, (without a ton of repairs necessary over that time, either) then it’s a good enough investment for our family!

I selected a 2008 Chevy HHR.  This car is really cute, but that really wasn’t why I picked it!  It has 4 doors, which is huge to a mom with a bad back who has been struggling to get her 2 kids into carseats without back doors, let me just tell you!  It has incredible cargo area, and I got the additional safety package (airbags in the back doors for the kids, anti-lock brakes, front airbags, and some other stuff).  I was approved for financing through GMAC, and was given a choice of taking 0% interest over the 60 month loan; or $2,000 cash back.  I actually told the dealer I’d have to call him back, because I just didn’t know which option would be better!

I found an article on SmartMoney.com, with a calculator to help me determine whether or not I’d make out better with a 0% interest rate for the life of the cash loan or taking $2,000 cash back.  After entering in the finance details of the car, including the full price of the car (and adding in the extended warranty with $0 deductible) I discovered it was definitely better to take the 0% interest for the life of the installment loan- to the tune of $57 PER MONTH better.

The reason the 0% financing works out better for me is because had I chosen the $2,000 cash back offer, my interest rate would have been 8.8%.  This makes no sense to me, but it was explained to me that I qualified for either their 0% offer or cash back, but not for a low interest rate on top of the cash back. 

If you’re looking at buying a new car and have the option of taking 0% interest for the life of the loan, or receiving a cash back incentive- make sure you try out that little calculator on SmartMoney.com to determine which gives you the better deal.

Should You Take the Cash Back or Low APR Financing on a New Car? was created by and is property of American Consumer News.