Do you take the rebate or the zero rate loan? Which is better for you?

Manufacturers often try to boost sales by offering new car buyers either a rebate or "zero" (or low) rate financing, but it can be hard to figure out which is the better deal for you. You can go with your gut hunch or you can figure it out for sure.

Before now, figuring it out wasn't real easy but that's changed.

Bankrate.com has built on their website (click here) a calculator that lets you put all the numbers in and then compares them so you can see the real cash difference. Just plug the numbers in and it tells you the best deal in plain English.

For instance, let's take a look at a $20,000 loan over 4 years (try never to go over 4 years or you'll hear the car dealer start talking about "Negative Equity" when you go to trade it in any earlier than 2 or 3 years down the road; that and other car dealer terms can be learned by clicking here for our Car Dealer Dictionary).

If you can get a 5% loan rate and take a rebate of $1,000, is that a better deal than if you can get a zero interest rate but no rebate money in your pocket? At first glance, it seems like it and that's what Detroit wants you to think, but you'd be wrong.

Turns out that if you take the zero rate loan you'd save yourself $1,000. In other words, the rebate equals the interest you'd save. Now that you know the real truth, the decision becomes different. It's just a matter of do you want to pay higher payments each month or get that $1,000 in your pocket right now? You can see that actually, if you take the higher interest rate loan then you basically are borrowing that $1,000 from yourself because the loan will cost you $1,000 more than it would if you just took the zero rate in the first place.

The numbers can change depending on the interest rates in your area and the rebate numbers for the vehicle you are considering. And don't forget that often the manufacturer will give the dealer their own rebate (they call it "incentive money") so take advantage of that too.

Manufacturers don't make it easy to pick and choose your best deal, what with gas savings, rebates, dealer incentives, 1.9 and zero rate loans, and all the rest. Bankrate.com makes it a little easier.

Of course you still have to avoid the lemons out there. And the binding mandatory arbitration clauses too.

In a recent court case, Ford was required to back back a lemon car and to pay back to the consumer the amount that the selling dealer increased the actual purchase price in order to pay off the consumer's trade in. That's a first.

Called "negative equity" by car dealers, it can mean that your trade in vehicle isn't worth what you owe on it. Some dealers hide the numbers by jacking up the sale price without really telling the consumer what is happening. Other dealers aren't telling the truth about the trade in value in the first place. Either way, it can cost you money.

Now, the courts are recognizing that when that shiney new car turns out to be a lemon, then the manufacturer shouldn't be allowed to rip you off again by deducting the so-called "negative equity" amount from the money they have to refund. That's only fair. After all, if they had built it right in the first place, you wouldn't be in that spot.

That's good news for consumers, certainly, but the problem goes deeper than that. Before you go to the dealer's lot, check online to find out what your trade in is really worth. Then, argue for the highest dollar when you are negotiating on the dealer's lot.

And don't let them hide the number with some excuse like "oh, don't worry, we'll pay it off for you." Know the numbers; that's the one thing car dealer's don't want you to know and there's a reason. The less you know, the more they make off you.

It's your money, so don't waste it.

You read more car dealer terms and what they mean by clicking here to read our Car Dealer Dictionary.