Buying a Car With Cash: What You Need to Know

By Jackie Beck   Updated 08/23/2022 at 2:41 pm

When you’re buying a car with cash, there are several things to consider.

You can buy a new or used car, and you can buy it from a dealer or a private party. You can save up for your dream car, or buy a starter car and work your way up.

Here’s what you need to know about paying cash for a car, plus the pros and cons of doing so.

Why Consider Buying a Car With Cash?

Do you like debt? If the answer is no, that’s a huge reason to consider buying a car with cash.

When most people think about buying a car, they think about financing it. This is the option that allows you to spread the cost of the car out over time and make smaller monthly payments. But…when you do that, you usually pay more.

So let’s talk about some of the biggest advantages of buying a car with cash.

Pros of Buying a Car with Cash

There are a few pros to buying a car with cash. One is that you won’t have to worry about making monthly payments or paying interest.

Another is that you may be able to more easily buy from a private party. That can allow you to get a deal on a car that you might not otherwise be able to get from a dealer.

And lastly, you’ll have the peace of mind of knowing that you own your car outright. No one’s going to repossess it if you lose your job and can’t make the monthly payments. Peace of mind is HUGE.

Cons of Buying a Car With Cash

But of course everything has its drawbacks, and using cash to pay for a car is no exception.

For one thing, you’ll need to save up enough money to be able to buy a car. This can be easier than you think though, if you’re willing to pay yourself the car payments you’d otherwise be making and/or to start out with a less expensive car.

The only other real disadvantage is that you can’t use the money you spend on the car for something else. Sometimes people who have enough money to pay cash for a car believe it’s better to go into debt at a low interest rate. That way that they can use their cash to invest instead.

However, in practice what often happens is people finance a car and then do not invest the difference. They just end up in more debt.

So if paying cash for a car seems right for you, read on.

Steps for Buying a Car With Cash

Paying cash for a car doesn’t have to mean you need to save up tens of thousands of dollars first.

(And that’s a good thing, since according to KBB the average price of a new car hit $47,148 recently.)

It means you need savings & a plan. Here are the basic steps:

1. Decide about how much you want to spend.

This is your car-buying budget, and your bank account balance and/or the time you’re willing to wait to save up first should dictate it.

2. If you don’t already have the money…

If you don’t already have the money, start making “monthly payments” to yourself that equal what you’d otherwise spend on a car payment and insurance. Save up until you have the amount you need.

3. Research the cars available in your price range.

If you have a particular make or model in mind, you can get more specific. If you’re ok with anything in your range, you’ll have more options.

Since car prices are so wild right now, you may want to check sold listings on eBay in your area to get a general idea of what things are going for at the moment. (Choose clean title.)

Then you can narrow things down from there. Make sure to keep the costs of insurance in mind too.

4. Only look at cars whose final price are likely to be within your range.

Take your time and actively look. Check bulletin boards if you live in an area with lots of senior citizens, ask friends & family if they know of anyone selling the car you want, check online at reputable sites, and check dealers.

Stay strong during the process! The more you want a certain car, the more you’ll need to stick to your budget, especially if you’re buying at a dealer.

5. Be sure to avoid scams.

Anything that seems too good to be true or that has a complicated story attached almost certainly is a scam, and it’s not worth chancing it and losing your money. Anything that requires you to cash a check for someone in order to buy a car DEFINITELY is a scam.

6. Get the car you have in mind checked out before buying.

Get a copy of the CARFAX report and read it. (You’ll need the VIN for that.) If you’re buying from a private party (and sometimes even from a dealer), have a trusted mechanic check it over and tell you what’s wrong with it. Test drive it too, of course.

7. Negotiate, negotiate, negotiate.

Negotiating with a private seller is relatively easy: you make an offer, and then see if they’ll take it or meet in the middle. It usually just takes a few minutes.

At a dealer, it’s more complicated. Bring snacks (I’m serious) because you may be there a while. Go at the end of the month if you can.

Don’t get tempted to overspend by financing, and don’t be afraid to walk away at a dealer, no matter how long you’ve been negotiating. It is ok to leave!

Most importantly, ONLY discuss the final out-the-door price. Do NOT let them talk about payments or run your credit. You’re paying cash! You don’t need payments. Stay focused.

They often make more from people who finance cars vs. those who pay cash, but they still want to make a sale.

Story time: For example, when I bought a 10 year old car a while back, at the time most similar ones were selling for around $18,000.

I saw one that was worth around $18,000 at a corner lot dealer. But they had it priced at something absurd like $32,000! When they told me their price, I literally started laughing, got up, and headed out the door. They followed me, and after a couple of hours of negotiating, they sold it to me for the $18,000.

My “negotiating” tactic was basically to keep offering them $18,000 or less, and to keep saying no to all their other prices.

Don’t give a reason when you say no. (Here are a whole bunch of ways to say no without really giving a reason.) Salespeople are trained to hear a no that has a reason attached as just an objection to overcome.

I was a broken record, and it did work — shortly after the third time I said “well, I don’t think this is going to work” and stood up. I made it all the way into my car to leave that final time. (And I did intend to leave, but they stopped me and made the deal.)

It helps to think of it like a game at a dealer, and again, to be 100% willing to walk away.

8. Be patient.

You may actually have to walk away, or look for a good while when buying a car with cash. But that’s because you’ll be sticking to your guns vs. overspending and ending up with a car payment. So try to be patient while you’re searching. You may even need to expand your search to other areas.

9. Once you have a deal, arrange payment.

Even though you’re buying a car with cash, chances are you won’t really be using cold hard cash to complete the purchase. (Unless you’re “only” spending a couple thousand dollars, maybe.)

You’ll use a cashier’s check instead, which may also mean filling out a form required by the Patriot Act.

With private sellers, you can meet them at your bank. They bring the signed title, the car, and a bill of sale, and you get the cashier’s check from your bank to give them in exchange. (Do make sure they own the car free and clear so they can sell it to you.) You’ll then need to transfer the car into your name at the department of motor vehicles.

With a dealer, you’ll need to fill out the purchase agreement and title transfer paperwork. They’ll try to upsell you on various things at that point. Just keep saying no. Then you’ll either bring them a cashier’s check or (at smaller places) they may go with you to the bank while you get it. They’ll give you temporary plates and file the title transfer paperwork.

10. Enjoy your paid for car!

(After you get adequate car insurance, of course.)

The Bottom Line: Buying a Car With Cash is a Great Feeling

Buying a car with cash takes patience and perseverance, but is a great feeling! By following these tips, you’ll be able to find a good car for you at the right price.

Remember to stay focused on the final price and don’t let the dealer talk you into unnecessary payments or extras. Then enjoy your new (or newly paid for) car!

Buying a Car With Cash: What You Need to Know

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