One of the biggest advantages of buying a car in cash is the discount you enjoy. While some dealerships have fixed discount amounts to give to their customers, others agree to reduce the cash price for a car after negotiation. Therefore, the amount of discount you can get varies depending on whether the dealership offers a fixed amount and how much you can haggle.
Besides, if the car is available at either financing or cash price, you’ll save a substantial amount on interest if you pay for the vehicle in cash. How much of a discount for paying cash for a car? This article will answer that question by discussing the factors that determine the amount of discount you can enjoy. Keep reading for more information.
- Ways to Get Discount for Paying Cash for a Car
- How to Pay Cash for a Car?
- Advantages of Paying Cash for a Car
- Disadvantages of Paying Cash for a Car
- Frequently Asked Questions (FAQ)
- The Bottom Line
Ways to Get Discount for Paying Cash for a Car
Paying cash for a car is the perfect opportunity for you to spend less on a vehicle. Even though it may seem like you’re spending a lot of money at a go, you’re saving money. Don’t be fooled by the small monthly installments on car financing, which carry interest. The following are some of the ways you can get a discount by paying cash for a car:
1) Spending Less on the Vehicle
Did you know that paying cash for a car automatically results in you paying much less for the vehicle? Of course, you’ll pay less. However, it’s not easy for most people. After all, withdrawing a substantial amount from the bank to pay for a car is tough, especially when you remember the car’s value can reduce drastically. However, the car’s final price is only the built-in limit on how much you can pay. However, if you choose to finance a vehicle, you have no control over how much you’ll pay. Most car dealerships peg their interest rates on how much down payment you make and your credit score. Therefore, you cannot control how much you pay for the car.
2) Zero Percent Financing and Rebates
Paying cash for a car qualifies you for zero-percent financing. In other words, the price you pay is equivalent to what you would pay at zero percent financing, which is the discounted price of the vehicle. Therefore, you end up paying much less than someone who utilizes the financing option. Besides, you may enjoy cash rebates if you buy a car in cash. Of course, the discount you can get will vary from one car dealership to another.
3) Avoiding Paying Interest in Financing
Paying cash for a car is way different cheaper financing it. The biggest advantage of paying cash is avoiding interest on financing. For example, taking a $50,000 at 10% interest for 36 months means you’ll pay $5,000 more on the cash price. When you work out the monthly payments, they will come to $1,528, which looks manageable, but it isn’t. With outright cash payment, you’ll save $5,000, which is a huge discount in itself.
4) Negotiating the Price of the Car
How much of a discount for paying cash for a car? The answer to that question largely depends on your ability to negotiate for the best price. When a car dealership realizes that you’ll be paying in cash, they’re more willing to negotiate the price. That’s because of the prospect of avoiding waiting for monthly payments. Here is how to negotiate car price when paying cash:
Dealing with a Private Seller
Instead of purchasing a car from a dealership, you may want to get one from a private dealer. If you choose that option, you should be ready to get a higher price quotation. That’s because private sellers have a slightly higher markup, and their settlement amounts could be higher. Possibly, they have a lien, which could drastically reduce the profit they’ll get after selling the car. It would help if you weighted your options. It’s easier to negotiate when the seller seeks an urgent sale. Start by setting the absolute minimum amount you can pay for the car. If the seller makes a counteroffer, you can slightly go up until you settle on an agreeable price.
Negotiating with a Car Dealership
You’re more likely to deal with an experienced salesman who knows how to squeeze cash from customers at the car dealership. However, that doesn’t mean that you cannot negotiate. Buying from a car dealership makes it extremely easier to negotiate the price. You can check through a long list of inventories and get the right vehicle at the right price. Unlike private sellers, car dealerships are industry players and will provide you with the car’s history and help you register the title in your name.
Here are a few tips to help you negotiate a good price with a car dealership:
- Research Your Vehicle’s Fair Price: Before going to the dealership, you should research your vehicle’s market-determined fair purchase price and trade-in value. Knowledge of these figures can help you beat the car salesman at their own game.
- Revisit Your Budget: Go back to your budget and check how much you can pay for the car. From that, you can determine a realistic offer and settle on the minimum price you’re willing to pay.
- Negotiate Strategically: When negotiating for a good price, avoid coming off too hard or too soft. If you’re too hard, the dealer may take a hardline stance. On the other hand, being too weak makes you a pushover, which isn’t good. So, be polite, patient, firm, and persistent. If the dealership doesn’t accept your offer, thank them and leave them with your contacts. If they have a change of mind, you might end up having your way later on.
- Negotiate All Angles of the Car Deal: Don’t leave out anything when negotiating for a good cash price. That includes negotiating a good price for the trade-in car, extended warranty, and other aspects of the deal. Remember, paying cash may not always result in a fair price since most dealers find car financing more lucrative. So, don’t be in a hurry. Give the dealership time to think about your offer. Since car salespeople have to balance accounts at the end of the month, they’ll likely give you a good suggestion then.
- Get an Out-of-the-Door Price: Now that you have cash in hand don’t hesitate to ask for an out-of-the-door price. Many dealerships will give you an offer, especially if they don’t want to negotiate with lenders for financing. Don’t forget to ask for new-vehicle rebates, further reducing the vehicle’s price.
- Avoid Negotiating with an Intimidating Salesperson: Some salespeople are so intimidating you cannot possibly negotiate with them. Steer clear of such salespersons since they can push you into paying the price beyond your budget. If you can’t reach a deal, walk away. It would help if you exercised the utmost patience when buying a car, so don’t let anyone rush you.
How to Pay Cash for a Car?
As you think about how much of a discount you can get for paying cash for a car, do you know how the process works? Here is a simple step-by-step process to help you purchase a vehicle in cash more easily:
Step 1: Save Enough Money
Of course, you can avoid this step if you already have enough money to pay for the car outright. If you have nothing set aside, save money weekly, bi-weekly, or monthly, depending on the frequency of your income. Set aside how much money you’ll put away every so often. If you are short of cash, start by tracking your spending and setting a budget. You’ll know where your money goes and how you can raise money to save.
Step 2: Find an Appropriate Car
Don’t neglect to research the type of car you should buy. That can help you make an informed decision and enlighten you on saving. Firstly, determine whether you want a new or used car. Secondly, choose the car make and model while remaining open to different models. Choose the factors on which you’re willing to compromise so that you’re aware of what you can give up. Pick a vehicle you can’t live without, find out its price, and establish that as the bare minimum you’ll be willing to pay.
Step 3: Negotiate the Price of the Car
The next logical step is to approach the private seller or car dealership to negotiate a good price. You can apply the tips above to negotiate for the best possible cash price on the car. After choosing a good car, inform the salesperson that you’ll be paying cash. With that, you can negotiate the price and avoid discussions on financing options. If you’re buying from a private seller, don’t forget to research the vehicle’s current market price. Knowing that can help you select the perfect beginning point for the cash price negotiation. With that, you’ll learn how much of a discount you can pay for paying cash for a car.
Step 4: Pay for Your Car
There are several ways you can pay for a car in cash – using actual money, bank transfer, or a cashier’s check. If you’re meeting the dealer or private seller in a neutral, safe location, paying with actual cash looks better. However, it presents the risk of you getting robbed on your way. In that case, you may have to make a bank transfer or acquire a cashier’s check. Remember, a cashier’s check is more secure than a personal one since a real cash deposit is back to the bank. You can get a cashier’s check after paying a small fee to the bank. However, some sellers may want you to accompany them to the bank. They want assurance of the genuineness of the check. Please do so.
Advantages of Paying Cash for a Car
- It makes you disciplined while saving
- You end up paying less
- It helps you make wise decisions like avoiding car financing
- You have power over your finances
- Avoiding regular monthly payments
- It enables you to fight depreciation on the vehicle
- You can enjoy great discounts
Disadvantages of Paying Cash for a Car
- It makes it difficult to build your credit
- You might lack the leverage to negotiate
- It could deplete your cash reserves
- Dealerships already consider you a cash buyer
Frequently Asked Questions (FAQ)
The Bottom Line
Now you know how much of a discount you can get for paying cash for a car. While you’ll avoid paying interest on a loan, the discount isn’t always obvious. It may come in the form of rebates from the dealerships or a reduction in the price after negotiations. That means you should be ready to negotiate with the seller until you get a fair price. However, you shouldn’t be in a hurry. Buying a car is a process that requires utmost patience and should never be rushed.