Buying a car with cash is rare these days. The majority of people pick financing options without question. But is financing your car purchase always the right decision? Find out why you should consider purchasing your next car with cash and how you can do it.
Why Buy a Car With Cash?
Buying a car with cash is an admirable goal to set for yourself, both from a willpower perspective and a financial perspective. It may seem like a smart decision, but why exactly is it a good idea? Here are the three biggest benefits of buying your car with cash.
You'll Actually Spend Less
By paying for your new car upfront, you'll actually be spending less money on the car overall. On one hand, you'll likely be more picky about how much you spend on the vehicle. After all, no one likes watching thousands of dollars fly out of their bank account in one day. Additionally, by skipping over the financing process, you'll be saving thousands of dollars in interest payments over the course of the loan's lifetime.
You May Get Discounts
Many car dealerships offer rebates for customers who pay for their cars in cash, allowing you to get a discount price. If you plan on buying a used car, paying in cash can also give you more leverage to negotiate on the price of the vehicle. Most people would prefer to have the full cost of the car upfront rather than deal with the hassle of monthly payments, so they may be willing to lower their asking price in exchange for the convenience of upfront money.
It Forces You to Make Tough Decisions
There is no doubt about it: cars are expensive, and paying for one with cash makes it more difficult to buy a vehicle with high-end features. However, this also forces you to prioritize your spending. How important are certain features of your car? Is it worth waiting another few months to save up more money for that special leather interior or amped up stereo? Could you live with the more affordable model of your favorite vehicle? These are tough questions to answer, but answering them honestly will ultimately lead to smarter spending.
How to Buy a Car With Cash in 2020
Making such a large purchase upfront can seem like a daunting prospect, but there is a step-by-step approach you can take to get the best deal possible on your vehicle.
Step One: Save Your Money
This may seem obvious, but one of the most important first steps to purchasing a car with cash is by beginning to actually set aside money each week, bi-weekly, or monthly. One way to keep things consistent is by choosing a set amount of money to put away every month. If you don't have a lot of extra cash to play with, begin tracking your spending with a free online tool. This will show you where your money is going and how you could potentially cut back in an effort to save more money.
Step Two: Find the Car You Want
Researching what kind of car you want isn't just essential for making an informed purchase, but it will also give you an idea of your savings goal. Do you want a new or used vehicle? Are you open to different models? What features are you willing to compromise on? Identify the vehicle you can't live without, determine how much they usually go for, and then set this as your savings goal.
Step Three: Learn How to Negotiate Well
Once you have your money saved and have determined what kind of car you want, it's time to start searching for your vehicle. One key to saving even more money during your car buying journey is by learning how to negotiate and get the best bang for your buck. How to approach this is going to depend on where you are buying the car.
- Buying at the dealership: It may be tempting to tell the salesmen upfront that you're paying in cash. Don't do this. The less information the salesperson has about your financial situation, the more power you have. Keep all financing conversations vague until you get to choose the car you want and get to their financing department. Tell them that based on the car you selected, you've decided to pay in cash. This will keep the conversation around pricing rather than financing options. If they try to steer the conversation away from price and towards financing, take control and push back.
- Buying from a private seller: Since most private seller car purchases are made in cash, the negotiation process is much simpler. Come to any conversation with a private seller armed to hilt with knowledge about the car you want to purchase. Know the car's current value, how much the value depreciates with different kinds of damage, and, if possible, try to sense how much the seller wants to get rid of the car. All of this knowledge will be useful when trying to get a lower price from anyone, but particularly private sellers who are less experienced in negotiating car prices.
Step Four: Pay Using a Cashier's Check
Many dealerships won't take a personal check or actual cash for a purchase of this size. If you're purchasing from a private seller, bringing cash with you is a safety issue. Go to your bank before making the purchase and get a cashier's check for the price of the car. There may be a small fee involved, but it is nominal. Wiring money can also be an option in some cases, but banks often charge hefty fees for this service.