How to Buy a Car With Cash

Deciding on whether you should buy a car with cash? Find out the advantages and disadvantages, how you can purchase a car with cash, and whether it's the right option for you.

HOME GUIDES How to Buy a Car With Cash

Carpages Staff

Car purchases can be intimidating, as they represent one of the larger expenses a person commits to. However, if you’re able, buying a car with cash upfront can help neutralize some of the unknowns that can sometimes make the process a bit scary.

If you’re thinking about buying a used car or even a new car with cash, there are some factors you should consider beforehand to help the process run smoothly. Here’s everything you need to know about how to buy a car with cash.

Why Buy a Car With Cash?

If you’re unsure whether or not buying a car with cash is a smart or feasible choice for you, it’s a good idea to weigh the pros and cons at the early stages of your car researching process. 

Advantages of Paying Cash for a Car

Believe it or not, when you buy a car with cash, you end up paying less in the long run than you would through traditional monthly payment methods. When you don’t have to worry about paying interest on an auto loan, that saved money adds up quickly.

Also, approaching the car-buying process with a fixed and rigid budget is easy when you plan to pay cash. It’s far easier to stick to your budget and not overspend when you take the option of a loan off the table right from the start.

Another important factor to consider is car depreciation. Because cars depreciate quickly, traditional loan methods often leave buyers stuck paying more for their car than it’s worth in the long run as payments stretch out over the years.

When you pay cash up front, you pay for the car’s value before depreciation starts to factor in, helping you make sure you truly get your money’s worth out of your car purchase.

Disadvantages of Paying Cash for a Car

Despite all the benefits of paying cash for a car, there are times when it won’t make financial sense for everyone. 

For example, if you have to use most of your savings to make the upfront payment, it’s probably wiser to either wait and save up or pursue an intelligent, well-researched loan option. For this reason, it’s a good idea to prepare for a cash purchase ahead of time instead of making a split-second decision.

Another situation in which a monthly payment might be better than paying cash is when a buyer with good credit can secure a low-interest rate. 

Although they will still end up paying the extra amount in interest, they can take that principal sum, and with a good investment opportunity, the buyer could make more in returns than they might pay in interest on the auto loan.

Similarly, it’s wise to check your options before committing to buying a car with cash. Auto traders often run financing deals or special offers that may be more financially sound than an upfront cash payment for some people.

It’s crucial to gauge all your options and take your time comparing them all to decide which approach will save you the most money in the long run.

Can I Buy a Car Fully With Cash?

The short answer is yes! With one upfront payment, you can purchase a car within your desired budget.

Be advised, though, that the best way to pay cash upfront for a car is not through cash money but with a cheque for the total amount. If you seek to purchase a new or used car from a trader or dealership, many businesses prefer their customers to finance.

These businesses will be less willing to accept cash but will often allow payments by cheque since it is easier to handle and process and more secure. 

How to Buy a Car With Cash

Now that you’re aware of all the factors you should consider when deciding whether or not to pay for your car upfront with cash, here’s how to make the process of finding and paying for a car with cash as smooth as possible.

  1. Research the Car You’d Like to Purchase

This step should be a given regardless of your purchase method. If you’re purchasing a used vehicle, it’s even more important to look at a used car buying guide to help you understand the car types, their pros and cons, and how to choose the right car. 

Differentiating between wants and needs while researching cars can help you stick to your budget. Consider the cost of fuel, the age and mileage of the vehicle, and hence its longevity, and consider what you’ll use it for.

If you’re choosing between pursuing a new or used car, keep in mind that used cars ultimately save you the most money in the long run. Because new cars depreciate up to 30% of their original value within the first year of ownership, used cars represent a far better value and bang for your buck.

  1. Set a Realistic Budget

With your needs in mind, you’ll be able to estimate a more realistic budget. Determining a realistic and firm budget is an important step in buying a car for cash because your budget will be a critical factor in where you shop and what kind of cars you look at.

When setting a budget, it’s important to be honest with yourself. Don’t overestimate your budget since this will lead you to look for more expensive cars than you can realistically afford.

If you want to purchase a car out of your current budget, go back to the drawing board and make sure that you’re shopping based on your needs. If so, then take a little longer to save to ensure that you can comfortably afford the kind of car you truly need.

  1. Calculate the Total Cost

When you buy a car with cash, the final cost you’ll pay will be more than just the sticker price. Factoring all of these extra costs and fees into your budget ahead of time will help save some shock and frustration.

Along with the cost of the car, you’ll want to calculate the cost of sales tax (a figure that will vary based on your province or territory), licensing and registration fees, and documentation or paperwork-handling fee for the dealer or trader.

Don’t forget to factor in car insurance costs, which is a monthly fee but will contribute to your car’s overall purchase price.

  1. Determine Your Current Car’s Trade-In Value

One way to help mitigate some of the costs is to trade in your current car. Using estimation guides, you can come up with an estimate of your car’s trade-in value. In some cases, if you’re purchasing a car from a dealership, you can trade-in your current vehicle at the same location for a price reduction.

However, if you’re purchasing in a private sale by the owner, your trade-in will have to take place beforehand or afterward, and the associated funds can help offset the cost of your purchase.

  1. Start Saving Up

Once you’ve determined the overall cost of the car you’d like to purchase and reconciled it with your budget, it’s time to start setting money aside so that you can make the purchase upfront with cash.

This can take some patience and determination, but many will agree that saving up before a purchase is better than making monthly payments plus interest after the fact. In addition, a sense of pride and achievement often accompanies such upfront purchases.

  1. Purchase the car at a reliable place

Now that you’ve saved enough money, it’s time to contact the classified pages and dealerships to take a look at the car you’re looking to purchase. Make sure you look for a seller that is reputable and reliable. Once you’ve secured a place to buy your car, make sure that the seller will take cash as payment. Sometimes, sellers will only accept cash up to a certain price. 

  1. Negotiate the Payment

Once you’re ready to make the purchase, even if you’ve saved enough for the asking price, it’s always wise to try to negotiate the sticker price. 

Many dealerships, traders, and private owners are open to haggling respectfully and can make reasonable accommodations. If you are purchasing from a dealer, don’t mention your intentions to pay cash outright.

Dealerships and auto traders usually offer their best savings to customers who finance because salespeople and the business will make commissions off the financing. However, you’ll get a better offer if you keep your purchasing method to yourself until the end of the process.

  1. Consider Using Certified Cheques

Once you’re ready to pay, make sure that you have your checkbook available and ready. Consider using a cashier’s cheque, which you can secure ahead of time at your local bank. This offers a very secure payment method with a foolproof record of payment. 

Other options, such as certified personal cheques and wire transfers, are also methods you can use to buy a car with cash. However, each one takes a different amount of time to go through and can be associated with small fees.

Final Thoughts

If you’re considering purchasing your next car with cash, be prepared to consider all these important factors that will help you make a financially sound decision you’ll be happy with for years to come.

Remember that while most car dealers will accept upfront payments, many will not accept cash money payments above specific amounts. This is because they are also more motivated to offer deals to customers who finance.

However, purchasing a car with cash can be an excellent option for someone willing to save up, stick to a budget, and avoid losing money to depreciation and interest. Make sure to research and weigh your options to make sure that buying a car with cash is the best method for you.