You’re finally ready to buy your first car, and you’ve probably heard to pay in full from nearly everyone, but hold on! While it used to be a good idea to pay in cash less than a decade ago, there’s a question going around asking if dealers are accepting cash.
Most car dealers do not accept cash purchases of vehicles because cash is insecure and a full purchase in cash takes away a potential profit. A recent car shortage has also forced car dealers to incentivize financing and reject cash.
Keep reading if you’re interested in learning how you can still pay for a car in full, see why dealers are rejecting cash, and determine if there are still benefits to paying with cash in full.
Unfortunately, today most dealerships will not take your full cash purchase. Why? The answer can simply be stated that car dealerships make more money when you finance with them. However, there is a recent issue in car manufacturing that explains why they are pushing for financing harder than before.
Over the last two years, there have been shortages in the electric chips that are essential for the electronics and navigation systems in cars. This caused a shortage of cars and now dealerships are scrambling to supplement their income to make up for the losses.
Through financing, the dealers can profit through interest rates, extended warranties, APR, or gap insurance, but when a customer is only going to pay in cash they would only receive the Manufacturer’s Suggested Retail Price.
The MSRP only accounts for the cost to make the vehicle and what the consumer might be willing to pay, so dealers don’t make much profit, if any, through the sticker tag. And with the car shortage today, they are likely to refuse full cash purchases.
paying for a car with cash won’t likely get you a car, but what if you were able to find a dealer accepting cash? Should you pay with cash then?
Dealerships still don’t like physical cash because they have to secure it in some way. If they did know you wanted to pay in cash because you brought a thick envelope with you, they also try to land you at the highest deal they can, knowing they aren’t going to make as much money.
Are there any good reasons to pay with cash? Well, paying for the car in full will still mean:
- No interest payments
- You can stay within budget easily
- Cash-back deals are extremely advantageous.
The third one is especially useful for you today and we will go over why in the “how to pay for a car when you have the full amount,” section below. So keep reading!
Does this mean there are no cars available to you if you have cash? Not quite. The cars in used car lots that depreciate in value easily over time are more likely to be available for cash purchases. Unfortunately, this excludes trucks because they maintain their retail value really well.
The cars available at car auctions are also traditionally exchanged with cash and only bringing cash will again ensure you don’t go over budget.
Finally, cars for sale by private sellers on eBay, Facebook Marketplace, or on the ad section of local news sites are also usually bought in cash because that’s what’s easiest for the seller.
In case you read this when car shortages aren’t a problem anymore, we’ll answer this question. Generally, if you can pay for your new car in full, do it. There are still the benefits to paying in cash that we mentioned, and if car shortages cease to be a problem soon, it will allow dealers to more readily accept full payments. In addition, some lenders can prevent you from paying your loan in full early by having early pay-off penalties.
Are there any reasons not to pay in full if you have the money? Well, some of you may not want to pay in full if you hope to increase your credit score. You only improve it when you make on-time payments and decrease your credit utilization, not by paying for the car in cash.
Is there any way to pay for your new car in full when dealerships today don’t want to accept full purchases? The good news is, there is a way, but it might seem backward.
The first thing you need to do is finance the car with the dealership. Yes, that’s right. Choose the finance option, but it’s okay! You already have the money that you need. Financing the car with the dealer is just the sure way of being able to walk out – or drive out – with the car you wanted instead of being refused.
These days, dealerships are also incentivizing buyers with financing rebates like 0% APR for 72 months or $1200 returns. If you choose to finance your car while having the full amount, you get to have these benefits. Then, all you have to do is pay off the car either before the first payment is due.
Now, this isn’t always a viable thing to do. Remember that some lenders have those early pay-off penalties. So, as always, read the fine print before you sign.
As for dealers who do accept cash, remember to never use physical cash in the purchase. Rather, pay with a check, and don’t say you intend to pay with cash. This is also a more secure way of paying for a car for both you and the dealer. It’s safer for you because you’ll have a paper trail, and it’s safer for the dealer because he doesn’t have to try to secure thousands of dollars.
Don’t feel discouraged because you wanted to pay in full with cash. You can still avoid the bulk of the extra costs that come with financing if you plan ahead. It can help to know if you’re looking at a good deal or not, so we’ve written a guide with 11 things to look out for to tell the difference.