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If this is your first time paying cash for a new set of wheels, it’s understandable for you to wonder how it all works. Truthfully, I would be concerned if you didn’t. So, before we dive too far in, let’s start with an answer to the most obvious question of all: do car dealerships accept cash?
Most car dealerships do not accept physical cash. Rather, you should plan to pay with either a personal check, or verified funds–such as a Cashier’s Check. These are the safest (and most secure) forms of payment for both parties.
In other words, while some dealerships might take it, I wouldn’t recommend walking into a dealership with a briefcase full of dough, ready to make it rain. (As cool as that would be.)
Instead, test drive the car you want to buy, strike a price, sign the deal, get out your checkbook (or go get a Cashier’s Check from the bank), slap it down on the financier’s desk, get a receipt, grab the keys, and peel out of there like a boss! (A little less cool, but it’ll do.)
Paying Cash At A Car Dealership: 5 Tips To Get The Best Deal Possible
Now that you know to pay for your car with a Cashier’s Check, there are a few more things to cover. Mainly, how to get the best deal possible. The good news is, cash gives you options, and negotiating power.
What follows are five tips for getting the best deal possible when paying cash at a dealership.
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1. Don’t Tell The Car Dealership You’re Paying Cash
When it comes to selling cars, a customer that chooses to finance is the best case scenario for a dealership. Why? Because they make money on the financing. So, if you want to get the best deal possible, don’t eagerly announce that you will be paying cash. In fact, you should wait until the last possible moment to reveal it.
The dealership wants your business, and if they offer you a good deal on a car because they assume you will be financing, that’s their mistake.
Now, I am not saying you should lie. If a salesperson straight-up asks you if you’ll be paying cash or financing, you should be honest. They have to make a living, and tricking them isn’t the goal. I’m just saying, you don’t need to announce it, unprompted.
2. Negotiate Your ‘Out-The-Door’ Price
The sale price of a car does not include taxes, title and fees. And when you’re paying cash, if you don’t account for these costs, they are almost guaranteed to blow your budget.
So, when you’re striking a deal with the dealership, be sure to negotiate your ‘out-the-door price’. It’s critical that you use that exact phrase. This is the total amount you are willing to pay, including all additional costs.
You see, when people finance a car, it’s easy to let these additional costs slip through the cracks, because they only add a few extra dollars to a monthly payment. But when you pay cash, you need to know the exact amount — down to the cent — that you will be paying.
3. Buy At The Right Time Of Month (And Year)
Did you know that salespeople — and dealerships as a whole — often receive incentives if they sell a certain number of cars each month?
That means that as the end of the month nears, they will be more willing to negotiate on the price of your car so that they can meet their incentive quota.
So, if you’re paying cash, and you want to get the best deal possible, you should wait to purchase your car until a few days before the end of the month. That said, I would not wait until the very last day of the month, because if they have already met their goal, they will have very little incentive to give you a good deal.
Moreover, dealerships often receive yearly incentive deals. Therefore, if you wait to purchase your car until the last few days of the year, you will probably get the absolute best deal possible.
4. Stand Your Ground
I will admit that I am a sucker for the ‘new car smell’. And when you walk into a dealership filled with shiny new cars, the aroma is almost intoxicating enough to make you forget about that cash and buy a brand new ride that’s way out of your budget.
On top of that, you have salespeople that are very good at their jobs trying to convince you to buy more expensive cars. I mean, how are you supposed to stick to your cash budget in that environment? Well, the answer is simple, will power. And you’re going to need a lot of it.
When you’re getting ready to pay cash for a car, don’t even flirt with the idea of financing. In fact, don’t even smell the inside of a car that’s outside your price range. Set your budget, and stick to it with all your might.
Cash gives you power, now wield it.
5. Say No To Add-ons and Warranties
Pound for pound, do you know what is one of the lowest profit items in a car dealerships? Cars. Where they really make their money is in the financing room. And it’s not just because of the financing itself. Dealerships make a ton of money on warranties and add-ons. And while these might sound enticing, as a cash buyer you should steer clear of them.
Think about it, if warranties weren’t incredibly profitable, they wouldn’t offer them. Sure, it feels good to have a warranty if your transmission goes out a year after you bought your car, but if you paid more for the warranty than a transmission would cost, is it really worth it?
Additionally, do you think dealerships just randomly come up with the price of their add-ons? No. They set those prices based on large amounts of data to ensure they are highly profitable.
The good news is, when you pay cash for a car, they can’t sell you on the warranty by saying something like, ‘it will only cost you $15 more per month’. You are paying for everything in full. And if your cold hard cash should go to anything, it’s the car itself, rather than add-ons that you may never even use.
Can paying cash for a car get you a better deal? Yes, paying cash can get you a better deal. First of all, you won’t have to pay the interest associated with a car loan, which saves you money. Secondly, as a cash buyer, you will be able to move quicker than somebody that chooses to finance. This can be especially helpful when negotiating with a private seller.
Do dealerships prefer cash or financing? In general, car dealerships prefer financing. This is due in part to the money they make from the financing itself, but also, the ease of incorporating add-ons and warranties into the sale. Additionally, financing enables dealerships to sell more expensive cars than a cash buyer can typically afford.
Why shouldn t you tell a car dealer that you re paying in cash? ›
Paying cash may hinder your chances of getting the best deal
"When dealers are negotiating the purchase price, they anticipate making money on the back end, via financing," Bill explains. "So if you tell them up front you're paying cash, the dealer knows he has no opportunity to make money off you from financing.
Don't settle on paying with cash or even mention it until the final price is negotiated, especially at a dealership. Holding back may net you a better deal at the dealership. From there, use your skills to negotiate an even better deal when you bring cash to the table.Do car dealers like when people pay cash? ›
Car dealers prefer finance customers over cash buyers. The main reason is profit on the back end, the F&I office. Statistics show finance buyers offer a better opportunity for the dealer to earn profit in the back end. Other than that it makes no difference to a car dealer.Is there a downside to buying a car in cash? ›
Cons of Buying a Car With Cash
Buying a car with cash is hard because it pulls money from your life savings for an asset that will go down in value. Of course, depending on how much money you have in your savings account, paying cash for a new vehicle could drain your savings, leaving you vulnerable in emergencies.
Getting discounts: Some car dealerships will give you a discount when you pay for a vehicle in cash. However, this varies from lender to lender.Will the IRS know if I buy a car with cash? ›
Yes. Once the dealership receives cash exceeding $10,000, a Form 8300 must be filed. The deal not going through may in fact be an attempt to launder illegal funds. If $10,000 or less was received by the dealer and the deal was cancelled, the dealer may voluntarily file a Form 8300 if the transaction appears suspicious.What not to say to a car dealer? ›
- “I'm ready to buy now.” ...
- “I can afford this much per month.” ...
- “Yes, I have a trade-in.” ...
- “I'm only buying the car with cash.” ...
- “I'm not sure…which model do you think I need?” ...
- “Oh, I've wanted one of these all my life.” ...
- “I'll take whatever the popular options are.”
New cars. It is considered reasonable to start by asking for 5% off the invoice price of a new car and negotiate from there. Depending on how the negotiation goes, you should end up paying between the invoice price and the sticker price.Does it make more sense to finance a car or pay cash? ›
Paying cash for your car may be your best option if the interest rate you earn on your savings is lower than the after-tax cost of borrowing. However, keep in mind that while you do free up your monthly budget by eliminating a car payment, you may also have depleted your emergency savings to do so.