Here's What You Need To Know To Buy a Car With Cash
A car purchase is a significant financial decision. With the average new car costing more than $40,000 and used ones not far behind at more than $25,000, you have to spend your money wisely.
While shiny paint, the latest technology, and the thrill of driving are excellent, paying for those things is another matter.
With vehicles commanding such a chunk of money, most buyers have to finance their purchases with a car loan. And it makes sense to do so, gradually spreading out their obligation over a term of several years. An auto loan frees up funds to take care of other financial responsibilities while still allowing people to drive the vehicle they want.
What if you've saved your money over some time and want to pay cash for your next car? Is there a real financial benefit? And how do you pay cash when buying a vehicle?
Let's explore the pros and cons of paying cash for a car.
How to pay cash for a car
Benefits of paying cash for a carThough paying cash for a car seems a lot more simple than applying for and securing financing, there are still details that need attention.
First, you need to know the price of the car, so it's clear just how much is coming out of your savings. Sellers may offer deeper discounts to cash buyers. Knowing a vehicle's invoice price can guide you on what you should expect to pay. You can locate this information on websites like Edmunds or Kelley Blue Book.
Next, you have to decide on a payment method. Though a traditional option for cash transactions is a cashier's check, you have additional alternatives to pay electronically today.
Services like PayPal, Venmo, and Zelle let you pay instantly with the touch of a screen, simplifying your transaction even further. However, many dealerships do not accept Paypal or other payment methods. Most widely accepted are cashier's checks or direct ACH (bank) transfers. Another thing to keep in mind is that electronic payments have monetary limits. It's good to check ahead when paying electronically and raise any limitations on your account.
Though paying in cash upfront is less complicated than financing, the usual details of an automotive purchase still apply.
Before you buy, it's good to speak with your auto insurance company to get coverage for your new vehicle. And whether you're buying new or used, you still need to pay for the taxes, registration, and title.
When you drive away, don't forget the bill of sale for your records. This vital document shows you're the legal owner, and you may need it down the road.
With all of the specifics required to buy a car, wouldn't it be nice to work with a seller you trust? With Shift's experience and expertise, they're with you every step of the way. Certified mechanics perform 150-point inspections on every vehicle sold, and you get a free Carfax report for the ultimate in transparency.
Benefits of paying cash for a car
Several financial advantages accompany paying cash for a car. The first and most obvious is having no monthly payment. Instead of being responsible for hundreds of dollars per month, you'll have that money to put towards other things year after year.
Another perk is paying cash makes you stick within a set budget. Say you've set aside $30,000 for your next vehicle purchase. When you begin looking at cars, extra add-ons may be available that add thousands to the price and take it beyond what you can pay. If you were taking out an auto loan, this might not seem like a big deal, with the cost of the car spread over months and years. But with a set limit on how much cash you can spend, you'll have to avoid these additional charges.
While financing a vehicle helps you pay your obligation slowly over time, interest payments increase the total cost, in many cases by thousands. When you pay cash, you avoid interest entirely, paying only the final purchase price.
Applying for and securing financing can take up a lot of time and be a hassle. The simplicity of paying cash takes some of the labor out of buying a car and lets you get out on the road as quickly as possible.
Looking at a Nissan Rogue, but you've never driven one? It sure would be nice to try before you buy. Shift makes the test drive process effortless. If you live in one of Shift's many service areas, a concierge will drive to you, letting you get a feel for its interior and performance before signing the papers.
Drawbacks of paying cash for a car
Though paying cash for a car might seem like the way to go, it might not be a good idea, depending on your financial situation.
When you spend a sum of money on a vehicle, it empties a significant amount of your savings. If paying cash for a car drains your entire savings account, it might not be the best idea. You may need a financial buffer at some point, and other alternatives can be better. For instance, making a significant down payment will lower your monthly payments while you can keep your savings around in case you need them.
If you have good credit and qualify for low financing, it can free you to invest your savings or spend your money in other ways. With ultra-low financing like zero percent, you can make a solid financial decision and keep your cash reserves for other purposes.
You can also qualify for special cashback rebates with a good credit score if you take advantage of low interest rate financing. These incentives open the possibility of saving even more money on your vehicle purchase, further lowering the appeal of paying cash.
Buying a car is a big decision, and you want to make sure you get what you want. Wouldn't it be nice to get a refund if you're unsatisfied? You can when you buy a used car from Shift. Just drive your vehicle for seven days and if you're unhappy with it, return it for a full refund, no questions asked.
Paying cash for a car in summary
You have to consider a lot of things when buying a car buying. There's the specific make and model, trim levels and options, and how to pay for it. Though people rarely buy a vehicle outright with cash, it's an option to contemplate if your finances allow it.
Besides not having monthly payments, buying a car outright saves you from interest charges and helps you stick to a budget.
Depending on how much money you've saved up in your bank account, paying cash for a car might not be for you. In the end, securing low financing and freeing up funds for other expenses may be just as beneficial.
When you're on the hunt for a quality used vehicle, Shift is your source. Just browse Shift's easy-to-use website and pick out the car you want from their wide selection. You can even complete the purchase from the comfort of your own home. And because Shift has best-in-industry service contracts, you can be assured your vehicle runs strong mile after mile.
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All prices are based on vehicle availability and pricing as of
November 22, 2021
Pricing shown is not guaranteed and does not include taxes or other product fees.