Car Loan Guide: When To Take Cash Back Over A Lower Rate

Summer is here, and so are the ads for new cars and trucks -- which means your dilemma is going to be whether you can afford one, and if so, what's the best method of payment.

The summer months represent peak sales season for cars and trucks, according to the National Automobile Dealers Association.

Despite high fuel costs, Americans are still buying: The industry experienced only a 2.5% drop in total sales between 2006 and 2007, and NADA analysts expect a similarly small decline through 2008.

Many dealers still offer the tried-and-true package of cash back or low-interest financing. You rarely get to have both, so choosing the one that makes the most financial sense for you is important. Use the Rebate vs. Financing calculator from BankingMyWay.com to help figure out which option provides the best savings in the long run.

To use the calculator, you will need to know the sticker price of the car you're considering, the down payment required to get the incentive package, the term of the auto loan you'll use to finance the purchase and the sales tax applicable where you live. If you're trading in an old car, you will also need to enter how much you still owe and how much you are getting for the trade-in.

Next, enter the details of the incentives: the amount of the cash rebate and the rate the dealer is offering as low-interest financing.

You also need to know the going rate for auto loans in your area (you can find that out in the auto loan section of BankingMyWay.com.