How to Pay Cash for a Car
If you want to pay cash for a new or used car, you’ll need to do your research, set a budget, and head to the bank to get a cashier’s check or money order.
Written by Cameron Thiessen
Reviewed by Georgina Grant
Table of Contents
- How to buy a new car with cash
- How to buy a used car with cash
- Pros of paying cash for a car
- Cons of paying cash for a car
- Finding cheap car insurance for your vehicle
Load full table of contents
If you want to pay cash for a new or used car, it’s important to properly budget for the purchase and thoroughly research your options. You’ll also need to get a cashier’s check if you are unable to pay for the vehicle electronically.
When buying a car, especially a new one, most people take out a car loan, allowing them to make monthly payments toward the total cost of their new vehicle. But if you’re in a financial situation where you can pay cash upfront, you’ll avoid costly interest payments added on top of the price of the car.
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How to buy a new car with cash
Buying a brand-new car
with cash upfront is uncommon but still possible! Here are some tips for making the process easier.Set a budget and have the cash ready
Set a clear, realistic budget for your new vehicle purchase, and don’t forget to account for the cost of taxes. It’s also a good idea to have an emergency fund set aside, just in case there are unexpected dealership fees or added features you just can’t do without.
Instead of a suitcase full of bills, the most secure way to pay for your vehicle upfront is through an electronic transaction or a cashier’s check. You may not know the exact price of your new car until you finalize the negotiation, so make sure you have more than enough funds in your account before heading to the dealership.
Do your research
To prepare for negotiating for your new vehicle, figure out the car you want, research its average value, and learn how pricing varies between the various trims and option packages. If you already have a vehicle, you can consider
trading in your car
to reduce the amount of cash you’ll have to pay for the new car. Kelley Blue Book
is a great tool for determining the fair market value of your dream car and the trade-in value of your current car. Knowledge is power!Negotiate the final price
Try to negotiate with the car salesperson the best possible price for your new car before announcing your intention to pay cash. This will give you greater bargaining power and help you settle on an even better final price.
Be prepared for paperwork
If the cash purchase price of your new vehicle is greater than $10,000—and it probably will be—you’ll need to file an Internal Revenue Services Form 8300.
MORE: How to calculate total interest paid on a car loan
How to buy a used car with cash
Paying cash for a used car is sometimes the simplest method when you’re dealing with a private seller. You can use some of the tips listed above when purchasing a used car, but here are a couple of other things to keep in mind.
You have to deal with your own paperwork
Most car dealerships will be happy to arrange all the paperwork and registration for your new vehicle for you—but if you
buy a used car
with cash from a private party, you’ll need to register your vehicle, pay your taxes, and get your car’s tags yourself. You’ll also need to make sure that you get the title, bill of sale, and most recent emissions certificate.Make sure to research your state’s requirements for a private vehicle sale so that you don’t miss any steps.
MORE: What is a good interest rate on a car?
Test drive the car and have it inspected
You should always test drive a used car to make sure it’s actually in a condition where it’s worth the asking price. Another must for buying used is to have the car inspected by a mechanic. You can often pay your trusted mechanic to come with you to look at a used car that you’re considering buying, or you can have the seller bring it in for you before you negotiate a final price.
During an inspection, you or your mechanic will be keeping an eye out for the following things:
- Exterior scratches, rust, dents
- Tire damage
- Interior damage
- Odor—mold, mildew, smoke
- Wear on pedals
- Cracked, chipped glass
- Uneven suspension
- Broken lights
- Broken electronics
- Damage under the hood—this is the one where a mechanic really helps!
- Undercarriage damage
If you know what problems are present, you’ll be more informed to negotiate a fairer price.
Pros of paying cash for a car
Here are some reasons why you might be convinced to pay the full cost of the car you want with cash upfront.
Makes buying a used car easier
If you’re doing a private sale, cash payment may be the simplest way to process the transaction.
No interest payments
One obvious reason to pay in cash for a new vehicle is to avoid pesky interest payments that come along with most financing options offered by dealerships.
No monthly car payments
When you pay upfront, you also won’t have the hassle of keeping up with monthly payments.
MORE: How to get a car loan from a credit union
Cons of paying cash for a car
Here are some reasons why you might be better off making a down payment and paying the rest off for a certain length of time—called a loan term.
Doesn’t help you build your credit score
A car loan is a really common way for people to build up good credit, assuming they’re able to keep up with their payments. When you put cash aside into a savings account, you can work toward your goal of paying for a car in full, but this won’t improve your credit rating.
Harder to qualify for dealer incentives
It may seem kind of upside-down, but car dealers actually want you to finance your vehicle because it means they can charge you interest! To counteract the interest you’ll have to pay, many dealerships offer special incentives, like complimentary vehicle add-ons or rebates, which are only available to those who finance their car purchases.
It can deplete your savings
While it may feel better to purchase something that you can afford all at once, spending such a large amount of money in one transaction can deplete the savings in your bank account, possibly ridding you of cash reserves that could serve as an emergency fund when you really need it.
Finding cheap car insurance for your vehicle
Whether you plan on paying cash for your next car or taking out an auto loan, you’ll still need to save up for the expense. A great way to save money on car expenses is to shop for car insurance using the
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Can you pay cash for a car?
Yes, you can pay cash for a car, but it’s best to pay in a form other than traditional bills, like a money order or personal check.
Is it better to finance a car or buy a car with cash?
There’s no simple answer to this question, but the majority of people benefit from doing a combination of the two. Making a solid down payment and choosing a shorter loan term can keep interest rates and monthly payments low, while still allowing you to build credit.
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