Are you in the market for a new vehicle? Your old car might finally have hit its last mile or you might feel you’re in need of a proper upgrade. Getting the money together to purchase a new vehicle can be difficult. After all, a good car can be quite expensive.
There might be ways to mitigate that cost. For example, you might be wondering: does paying cash for a car lower the price? You might have heard from friends or family members that paying in cash can help to get you a better deal on a new or used vehicle.
How much truth is in that sentiment and how would you go about it yourself? Read on and we’ll walk you through what you need to know.
Why Pay in Cash?
Owning a car is incredibly expensive! Just driving it off the lot can feel as if you owe an arm and a leg. At the end of the day, however, if you can pay for a car upfront you’ll be in a better financial position than if you need to keep making payments on it.
In fact, the average amount that most Americans put towards their cars each year is over eight-thousand dollars according to a study done by AAA. That’s a lot of money!
While it can be difficult to pull cash from your accounts and pay for your vehicle all upfront, it can be advantageous at the end of the day. It’s true that many car dealerships and salesmen will give you a discount if you’re able to pay in cash on the day of purchase.
Why would a dealership give you a discount on this kind of situation? There are many reasons. The most obvious is that your agreement to pay in cash makes you a more interesting buyer than many others on the lot.
The same car might be sold to someone who isn’t able or willing to pay upfront, meaning that the dealership will have to wait much longer until they receive all of the cash they are owed.
That’s in addition to the fact that cash in hand is quick, simple, and (depending on the sketchiness of your salesman) tax-free.
Negotiating With a Seller
Paying for a car in cash is so advantageous that it might put you in a better position with a car seller. You’ll be in a position of power and influence since they will likely want you to purchase the car.
If you’re willing to pay for a car or buy a used truck in cash, you should have the leverage to negotiate. The seller might be willing to take a lower price in order to get cash in hand on this day as opposed to having the car waiting around for a buyer.
Negotiating is another way that you can save a significant amount of money when purchasing your new car. How much you’ll be able to save will depend on the seller and the initial asking price for the vehicle.
Other Advantages of Paying in Cash
Why else might you want to purchase your new vehicle by providing a cash payment? There are a few good ones out there.
For one, you can avoid paying any and all interest by paying in cash. This might sound obvious but it is a benefit not worth overlooking. If you don’t have to finance your car purchase, that means you won’t have to deal with the interest payments that can really add up as the weeks, months, or years go by.
This could save you hundreds or even thousands of dollars over the lifetime of what your loan might’ve been.
If you don’t finance your purchase, you won’t pay any interest. How important is that? If you borrow $32,000 for five years at 6%, you’ll have a payment of $618.65 per month. That means you’ll pay total interest of $5,118.98 over the life of the loan.
That’s a lot of money saved!
How to Pay for a Car in Cash
If you want to purchase a vehicle in cash, you’ll need to take a few steps to properly prepare. For one, you’ll want to get your mindset straight. If you’re going to pay for a car in cash, you need to be realistic about what you’ll be able to afford.
That means sending those dreams of a luxury sports car from your head (if you even had them to begin with). The best way to get serious about what you can actually afford is to do a deep dive into your finances.
How much money could you realistically put aside right now without putting yourself into financial danger? Leave a little buffer room should any other emergency result.
If you have an existing car that you can sell, you can factor the money that you’ll earn into what you’ll be able to produce for your new vehicle. If you know the price of the car you want you can start a budget to work towards that financial amount.
Does Paying Cash for a Car Lower the Price?
If you’re deep into researching your new car purchase you may have a lot of questions. Common among many new buyers is this one: does paying cash for a car lower the price?
The above information can help you get the answers you need and more. Paying in cash can certainly help to make buying a new vehicle much more manageable.
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