The Best Strategy for Buying a Car When You’re Paying With Cash

Just like everything else, cars keep getting more expensive—new car prices have risen steadily in recent months, and will probably just keep getting pricier (the average new car now costs an eye-watering $49,740). That’s one reason why about half of all car buyers finance their purchase, and why we collectively owe an astounding $1.644 trillion in auto loan debt.

But that’s also why about 38% of car buyers bought their vehicles with cash. Cash offers some advantages, especially if you’re looking to avoid interest and monthly payments that can mess with your budget. But if you decide to buy your next car without financing it in any way, there’s one thing you should absolutely never do: Tell the dealership.

The benefits of buying a car with cash

Buying a car with cash doesn’t mean you dump an oil drum of pennies on someone’s desk, it just means you’re not financing the purchase with a loan. There’s absolutely no reason you can’t do this as long as you have the funds, and buying with cash has some serious benefits:

• No monthly loan payments. If you’ve ever financed a car, you know that paying several hundred bucks a month can put a crimp in your finances for years to come.

• No interest. Paying cash means you don’t have to pay extra on top of the price of the car.

• Avoid overspending. When you’re financing a car, salespeople usually keep you focused on whether you can afford the monthly payment, which can obscure how much you’re actually paying for the car. Paying cash means you don’t go over your budget without realizing it.

• True ownership. If you pay cash, no one can repossess the car—if you decide to sell it, it will be solely your decision. Plus, you start off with 100% equity in the vehicle.

On the other hand, dealers make a lot of money by getting you to finance the purchase through them. The majority of dealer loans have a markup of up to 2.5% that goes directly to the dealer, which can translate to a fair bit of money over the course of a car loan. That gives them an incentive to offer you a better price or to throw in extras—as long as they think that extra money is on the table.

The best way to buy a car in cash

People think buying a car in cash will get them the best price, but it’s actually the opposite—once a dealer knows they won’t get the extra money through arranging financing, they’ll have less interest in crafting an appealing price and throwing in extras.

If you’re going to pay for the car in cash, there are a few basic bits of strategy you should follow:

• Deflect. Salespeople will often ask you directly how you plan to pay for the car. If you’re going the cash route, deflect—tell them you’re considering options, or tell them you want to hear your financing options. Don’t lie, necessarily, but don’t admit you’re paying cash until you have to.

• Negotiate the final price. Get the best deal you can on the vehicle, including anything you can get thrown in (like coatings or free upgrades). Get it in writing, if you can.

• Arrange payment. Once you have the total cost of the car nailed down and you inform them that you’re not interested in financing and will be paying cash instead, be ready with a payment method. A personal check can cause delays and might not even be accepted, so having a cashier’s check from your bank is probably the easiest and safest way to handle this.

It’s not impossible that the dealership’s finance department will be unwilling to close the deal if they assumed they’d be making a profit from a loan. But if they won’t honor the price you negotiated when you want to pay cash, ask yourself if you can trust this dealer at all. If a dealer wants to blow up 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 bargain, but it can save you a lot of money over time—as long as you don’t tip your hand too early.

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