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How to buy a car with cash

Most dealerships and private sellers prefer a cashier's check to cold, hard cash.

Buying a car with cash means you won’t have to pay interest and fees on a car loan. Plus, you’ll fully own the car when you drive it off the lot. But you’ll need to consider more than just the sticker price when determining the total cost of the car.

How to buy a car with cash in 6 steps

Follow these steps to get the best deal on a car when you’re paying in cash:

  1. Start saving up.

    If you don’t already have the money on hand, start setting aside money from each paycheck for your new car. You might want to consider opening a high-interest savings account just for your car savings. You’ll collect interest on the money you deposit and won’t be as tempted to touch the funds.

    Having trouble figuring out how much to save? Budgeting apps like Mint can help you figure out how much money you can afford to set aside and track your progress.

  2. Research cars.

    If you don’t already have a specific car in mind, think about what you’ll need to use it for and go from there. Is it only you or do you need to drive your family around? Do you use it to get around town or are you interested in long trips?

    Consider these questions to narrow down the type of car you’re looking for.

    Also, weigh whether you want a used or new car. Used cars often cost less and lose value at a slower rate than new cars, but you’ll have fewer options to choose from and typically have a shorter warranty.

  3. Calculate the total cost.

    Once you have a car in mind, research the how much you need to have saved up to avoid financing. Consider the following costs:

    • The cost of the car. Research the price of the car in your area on sites like Edmunds and Kelley Blue Book to get a general idea of how much it will cost. Keep in mind you might not pay this exact amount — especially if you have good negotiation skills.
    • Sales tax. Visit your local DMV website to find out what the sales tax rate is in your area.
    • Registration and licensing fees. Also look to the DMV to find out how much you might pay to register and license your car. This includes the cost of a license plate and car title.
    • Documentation fee. If you’re buying from a dealership, they might charge you a fee for handling the licensing and registration paperwork. Many states have a limit to how much dealerships can charge.
    • Insurance. Most states have minimum car insurance requirements to own and drive a car.

    Add all these costs together to come up with a goal for how much to save before you get started.

  4. Calculate your current car’s trade-in value.

    If you already have a car, you can often trade it in at a dealership to reduce how much you have to pay out of pocket. You can get an estimate of how much your car is currently worth by visiting sites like Kelley Blue Book and Edmunds. The car’s value is based on factors like its make, model, mileage and where you live.

    You can subtract the trade-in value from the total cost of your new car if you plan on buying from a dealership.

  5. Negotiate with the dealer or private seller.

    Once you’ve saved up enough money, visit the dealership or private seller to negotiate a deal on your new car.

    Negotiating at a dealership

    Keep the conversation around the price of the car, rather than financing. Avoid mentioning that you’re paying up front in cash. Dealers sometimes offer better deals to customers who pay with in-house financing because they can make money off the interest.

    If they push you on financing, give a vague answer. Only tell them you’d like to pay in cash once it’s time to pay for the car.

    Negotiating with a private seller

    In this case, you can be up front about paying in cash since most private purchases are made in cash. But make sure you’ve done some research on the value of the car you’re interested in.

    Familiarize yourself with the price, how fast it might depreciate and check it out for damage. Having this information can help make sure you’re getting a fair deal on your car.

  6. Pay for your car.

    Once you’ve negotiated the price, it’s time to make the purchase. Buying your car with a cashier’s check is generally more secure than paying in actual cash — and a lot less of a hassle. Most dealerships don’t accept cash — and a cashier’s check gives you a record of the payment. Traveling with a lot of cash can also pose a safety risk.

    You can get a cashier’s check by visiting your bank. Most charge a small fee, typically around $10 or $15. These can take a couple of days to process. If you want to pay your dealership faster, consider a wire transfer. These are typically more expensive, but can get the money to the seller the next day.

4 tips for buying a car in cash

Make the most of your loan-free car-buying experience with these pointers:

  • Arm yourself with knowledge. The more you know about the car you’re interested in buying, the more likely you are to negotiate a better deal. Do some research the night before to make sure your numbers are up to date.
  • Ask about rebates. Many dealerships offer discounts on financing — which are no good to you as a cash buyer. Instead, ask about rebates and other discounts available when you’re negotiating.
  • Don’t mention trade-ins right away. Dealerships often have limits to how low they’re willing to go on the price of a car. Mention the trade-in up front and they might factor that into to the total price, giving you a worse deal.
  • Avoid paying with cold, hard cash. It can be dangerous to ride around with that much money, difficult to withdraw from the bank and you won’t have a detailed transaction record.

Paying cash vs. financing

Paying in cash has its benefits, but financing might actually be a better deal in some situations. You could potentially save more by financing if you invest the money you would have spent on the car, since investments can earn interest. It also breaks up the cost of the car into installments, which can be easier to manage.

Weigh the benefits of each with our article on paying cash versus financing a new car.

Test drive a car near you

Get connected with dealerships in your area that offer upfront pricing.

Bottom line

Consider the total cost of your car — and the trade-in value of your current vehicle — before you set out to buy a car with cash. And go into negotiations as an informed buyer to get the best deal.

You can read more about how it all works with our guide to buying a car.

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