# 0% Financing or the cash discount? Find the hidden rate > A dealer's 0% offer and its cash discount can't both be the best deal. Get both prices in writing, turn the gap into a rate, and compare it with what borrowing elsewhere would cost. By Elie Mendlow · Published November 9, 2026 Section: Business Funding › Grants · Series: Contractor Desk (https://mcafax.com/notebook/series/contractor-desk) Canonical: https://mcafax.com/notebook/contractor-dealer-zero-percent-vs-cash Source: MCAFax, The Broker's Notebook (https://mcafax.com/notebook). MCAFax is not a lender or a law firm. --- $78,000 Cash. $84,000 at 0%. Same compact track loader, same dealer, same afternoon. For a contractor, the decision factor is the gap between those two prices. A 0% offer can be built into a higher financed price, so it isn't always the cheapest money. Get the cash price and the financed price in writing, turn the gap into a rate, and compare it with borrowing elsewhere. General info, not legal or financial advice. ## Why can a 0% deal cost more than paying cash? Because the price can move. Buyers in equipment forums report getting a lower cash price than the 0% price at the same dealer. Ask whether taking the promo means giving up a cash discount or rebate. When the financed price is higher, the 0% isn't zero. The cost sits in the price. That doesn't make every promo a bad deal. Sometimes the prices match and 0% is the best money you'll find. You only know once both numbers are on paper. ## How do you turn the price gap into a rate? Treat the cash price as the real amount borrowed. Then ask what interest rate would turn that amount into the 0% payment. ### Worked example All names and numbers are made up. Clearwater Site Work wants a compact track loader. The dealer quotes: - Cash price: $78,000 - 0% Price: $84,000 over 48 months, or $1,750 a month The $6,000 gap is the cost of the 0% deal. Borrowing $78,000 and paying $1,750 a month for 48 months works out to about 3.7% APR. That is the hidden rate. Now compare. Clearwater's bank offers 8.5% for 48 months on $78,000. The payment is about $1,923 a month, and total interest is about $14,283. Next to that, the 0% deal's $6,000 cost is the cheaper path. Flip one number. Say the 0% price was $92,000 instead. The gap is now $14,000, close to the bank's interest. At that point the deals are about even, and the bank loan may come with fewer strings. ## Does a shorter 0% term change the math? Yes. The same $6,000 gap costs more per year when the term is shorter. Run Clearwater's quote at 36 months instead of 48. The 0% payment becomes about $2,333 a month. Paying that on a true price of $78,000 works out to about 4.9% APR. Same dealer, same gap, higher hidden rate. A shorter term also means a bigger monthly payment. Check that $2,333 against your slowest month, not your best one. A winter with two idle months can turn a cheap rate into a cash squeeze. ## Does federal truth-in-lending law protect a business buyer here? Mostly no. Regulation Z, the federal truth-in-lending rule, exempts credit extended primarily for a business, commercial or agricultural purpose: https://www.ecfr.gov/current/title-12/chapter-X/part-1026/subpart-A/section-1026.3 So the dealer may not hand you an APR box like a car buyer gets. State rules vary, so check your state's financial regulator. Either way, do the math yourself. ## What should you ask the dealer in writing? Put these on one quote sheet: 1. Cash price, out the door, with the same attachments 2. Financed price at 0%, term and monthly payment 3. Whether rebates or cash discounts are lost by taking 0% 4. Any documentation fee, required insurance or service plan inside the financed price 5. Prepayment terms, if you pay it off early Then get the same machine quoted at a second dealer. Machine price and financing terms are separate choices. ## When does paying cash still make sense? When the cash won't be needed for the next payroll, materials or retainage gap. A loader paid for in cash can't make payroll. Before you pay $78,000 up front, check your slowest month of the last year. If cash is tight, the 0% deal can keep it in the bank at a known cost. SBA 7(a) loans can also be used to buy machinery and equipment through a lender: https://www.sba.gov/funding-programs/loans/7a-loans Dealer financing is an equipment loan, not a merchant cash advance. The difference is here: https://mcafax.com/notebook/equipment-financing-vs-merchant-cash-advance More on the machine choice: buy, lease or rent at https://mcafax.com/notebook/contractor-buy-lease-or-rent-excavator and down payment basics at https://mcafax.com/notebook/contractor-equipment-down-payment. The contractor funding guide: https://mcafax.com/notebook/construction-business-loans. Funding types side by side: https://mcafax.com/notebook/where-to-get-business-funding ## Questions readers ask **Is dealer 0% financing a merchant cash advance?** No. It is an equipment loan or installment contract tied to the machine. A merchant cash advance is generally a sale of future receivables with a different cost structure. **Can I take the cash discount and still finance?** Sometimes. Ask whether the cash price holds if you pay the dealer with a loan from your own bank. Get the answer in writing. **What if the dealer won't give a cash price?** Get a written quote on the same machine from a second dealer. Without a cash price, you can't measure what the 0% costs. **Do attachments change the math?** Yes. Make sure both prices list the same bucket, attachments, warranty, freight and setup, or the comparison is off.