The Best Car Buying Strategy When You’re Paying Cash
Like everything else, cars continue to get more expensive —new car prices have been rising steadily in recent months and are likely to continue to rise (the average new car now costs a whopping $49,740). It’s one of the reasons why about half of all car buyers finance their purchase, and why we collectively owe a staggering $1.644 trillion in auto loan debt.
But that’s why about 38% of car buyers bought their cars with cash. Cash offers some benefits, especially if you want to avoid interest and monthly payments that can ruin your budget. But if you decide to buy your next car without financing it somehow, there’s one thing you should never do: tell the dealership.
Benefits of buying a car with cash
Buying a car with cash doesn’t mean you’re dumping a barrel of oil and pennies on someone’s desk, it just means you’re not financing the purchase with a loan. There’s absolutely no reason why you can’t do this as long as you have the funds, and buying with cash has some major benefits:
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No monthly loan payments. If you’ve ever financed a car, you know that paying a few hundred dollars a month can jeopardize your finances for years to come.
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No interest. Paying in cash means you won’t have to pay extra on top of the price of the car.
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Avoid overspending. When you finance a car, sellers tend to focus on whether you can afford the monthly payment, which can hide how much you’re actually paying for the car. Paying in cash means you won’t go over your budget without even realizing it.
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Real ownership. If you pay cash, no one can repossess the car – if you decide to sell it, it will be entirely your decision. Plus, you start with 100% equity in the car.
On the other hand, dealers make a lot of money by getting you to finance your purchase through them. Most dealer loans come with a markup of up to 2.5% , which goes directly to the dealer, which can generate a nice amount of money over the life of the car loan. This gives them an incentive to offer you a better price or add extra services – as long as they think they have extra money in their account.
The best way to buy a car with cash
People think that buying a car with cash will get them a better price, but it’s actually the opposite: once the dealer knows they won’t make any extra money by arranging financing, they will have less interest in pricing it attractively and making the investment. add.
If you’re going to pay cash for a car, there are a few basic strategies you should follow:
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Reject. Salespeople will often ask you directly how you plan to pay for the car. If you’re going the cash route, deviate—tell them you’re considering your options, or tell them you want to hear your financing options. You don’t have to lie, but don’t admit that you’re paying cash until you have to.
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Agree on the final price. Get the best deal on your car, including anything you can add (like coverages or free upgrades). If possible, put it in writing.
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Arrange payment. Once you have determined the total cost of the car and let them know that you are not interested in financing and will instead pay cash, have a payment method ready. A personal check can cause delays and may not even be accepted, so having a cashier’s check from your bank is probably the easiest and safest way to deal with this problem.
It’s possible that the dealership’s finance department will be reluctant to go through with the deal if they expect to make a profit on the loan. But if they won’t honor the price you agreed upon when you want to pay cash, ask yourself if you can trust that dealer at all. If a dealer wants to crash a sale when you want to pay cash, it’s best to walk away.
Paying cash for your next car won’t magically make it a good deal, but it can save you a lot of money over time—if you don’t tip too early.