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Sunday 28 August 2016
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Will You Get a Better Deal Paying Cash For Your Car?

Will You Get a Better Deal Paying Cash For Your Car?

People ask me all the time on the radio “will I get a better price by paying cash for my next car?” While there was a time when the answer was yes, today the opposite is actually true.

You read that right, you can often get a better price by financing the car with the dealership you are purchasing from.

Thinking back to my years in the retail auto industry, I ran across a lot of people who wanted to throw around the fact that they were paying cash, and were determined that they should get some sort of special deal because of that. The truth was, as a car dealer, I didn’t really care how we got our money. Whether cash, credit union, bank, or one of our finance sources, we got our money quickly in most cases, so waving a blank check in front of me did not carry any weight when it came to pricing my vehicle.

A few years ago, and even more so today, many of the captive finance sources (Ford Credit, Ally Financial, Toyota Financial Services, etc.) began offering extra rebates for financing with them. I’ve seen those amounts as large as $1500. Diehard cash buyers are often put off by this and get angry with their car dealer, but the truth is, the dealer cannot control this. There is an easy way to get around it, however.

The finance companies offering the rebates are enticing you to finance with them, of course to make a return through interest rates. They are hoping that you will decide to keep the loan so they can make money. In these cases, the savvy buyer will proceed with financing the car, get benefit of the financing rebate, and simply pay the car off in full before the first payment is due. You get full benefit of the extra rebate and get to write a smaller check. The finance companies know a lot of people are going to do this and they are fine with it.

One important note: dealers like to tell you to make the first three payments before you pay the car off. Dealers are paid a flat fee in many cases, it’s normally a couple of hundred dollars. That flat fee is charged back to them if the consumer pays off their car before three payments are made, but by law, you can pay it off at any time.

Getting a better price in the case of paying cash even when there are no additional rebates, just isn’t true, not any more at least. The last figure I saw nationwide showed that dealers average $700 in finance income from every car they sell. These profits are derived from the sale of extended warranties, credit life insurance, gap insurance, etc.

Going back to my days as a dealership owner, when we were on a tight deal, meaning we were at the point of parting ways with the customer and having a no-sale, I would ask how the customer was paying for the car. If they were financing with us, I would accept the deal in hopes of making a profit on a warranty or some other product. If they were paying cash, I would likely pass on the deal. So as you can see, paying cash was a detriment to the consumer instead of a benefit.

Paying cash will reduce your time spent in a dealership, and you can avoid interest charges if the car you are buying does not offer 0% APR financing. However, paying cash will not necessarily guarantee you a better price, and in fact, it might cause you to pay a higher price.

-Jerry Reynolds, The Car Pro




67 thoughts on “Will You Get a Better Deal Paying Cash For Your Car?

  1. Darryl

    Point well taken. This is how it SHOULD be! So, I ask the question, why does the “modern” salesman/salesperson still ask, early in the meeting, “Will you be financing this car?” It happens all the time.

    Reply
    1. Jerry

      Thanks for listening to the show!

      Dealers always want to show you the lowest price, so if there are rebates involved with financing, they want to know so they can deduct the rebate before showing you the price.

      Jerry Reynolds “The Car Pro”
      President, Car Pro Radio Networks

      Reply
  2. JOwen

    If you are charged a higher price to finance a vehicle than the sale price if you finance, it is illegal under most state finance codes and Federal Truth in Lending Act. The price in a cash deal by which the sale price exceeds the price in a finance transaction is actually undisclosed finance charge. Dealers that do this are not reputable and you should not deal with them.

    Reply
    1. Jerry

      That is incorrect James, and not what I said. The price of the car does not change, the amount of rebates to be deducted from that price does change in many cases depending on whether you finance or not. If a finance company wants to give you money for financing with them, there is nothing illegal about it.

      Jerry Reynolds “The Car Pro”
      President, Car Pro Radio Networks

      Reply
  3. John

    Another point: I bought my Honda in December. I did not want to finance since I don’t have debt (am retired), but Honda offered me 0.9% financing, no additional fees, and a $500 discount. 0.9% money? Since I had the cash, I took the minimum amount to finance ($7500) and put the cash into a dividend-paying ETF averaging 2.8% dividend, and have already got more than the financing cost back in dividends. I still have the $7500, plus accumulated dividends, and can sell at anytime to pay off the loan. Even putting the cash in a CD would likely pay me more in return than the interest cost. Making my money work for me, and using your certificate works for me!

    Reply
  4. Loraine

    What if they tell me a bottom price, and then I tell them that I will be paying cash. Can they take back the offer?

    Reply
    1. Jerry

      Yes, unless you’ve done all the paperwork etc. Sounds like a case of the dealer using a rebate that requires you to finance with them. if that is the case, go ahead and finance and pay it off within 30 days and there is no interest.

      Thanks for listening to the show.

      Jerry Reynolds, President
      Car Pro Radio Network

      Reply
  5. Linda

    I have about 30K to spend on a vehicle I am 63 and my husband 61 and paralyzed on the left side so ease of getting in and out for both him and a wheelchair are a primary factor. I’ve been looking at Honda CRV, we live in San Diego, how should we proceed?

    Reply
    1. Jerry

      Linda, good to hear from you. I would get him out to look at some vehicles to see what he can get in and out of the easiest. CRV is a great choice, I’d look at Toyota RAV4, and also Ford Escape and Chevy Equinox.

      All 4 are great and will give you good service, the question is his comfort, which unfortunately, i can’t answer.

      Once you decide which is best, feel free to holler back at you and I’ll try to help.

      Jerry Reynolds, President
      Car Pro Radio Network

      Reply
    1. Jerry

      Sorry, I need a lot more info that that, and I really don’t keep up with used cars values. I would look at comparable cars on http://www.autotrader.com to get a good feeling for the market in your area.

      Good luck.

      Jerry Reynolds, President
      Car Pro Radio Network

      Reply
  6. Zee

    Planning on buying two cars with cash- one family SUV & a car for a college student.Need advice on how to make the smartest choice.

    Reply
    1. Jerry

      Shoot me an email at jerry@carproshow.com and tell me what you want, where you are located, and I’ll set everything up for you with my dealers closest to you. That’s the smartest and cheapest way to get them.

      Thanks for listening to the show.

      Jerry Reynolds, President
      Car Pro Radio Network

      Reply
  7. Ricky

    I have 25,000 and want to buy an 2011 Ford F150 Harley Davidson truck can u tell me how to go about purchasing to get the best deal.

    Reply
  8. Shon

    Hello Jerry,
    I just stumbled / Gooooogled across your website and have a question/situation similar to that of Zee’s. (The previous question in the comment section.)

    We are looking at buying two vehicles (his & hers), one a truck-for errands (yard of soil), etc. and the other an economy/gas mileage/small/safe car she’ll be comfortable driving – like our recently deceased ’94 Geo Metro, size wise, but newer. We would consider an electric car for her. If there are tax breaks/incentives involved.

    You seem to have an informative website. I would really appreciate further advice from you and look forward to hearing from you soon.

    Shon in WA State.

    Reply
    1. Jerry

      Good to hear from you. I hope you’ll join us for the show. I am not sure of the rules in Washington State on electric vehicles, my show doesn’t air there. I would strongly consider Chevy Volt since it has extended range.

      On trucks, I lean to Ford, they are very tough.

      I hope this helps you!

      Jerry Reynolds, President
      Car Pro Radio Network

      Reply
  9. Maurice

    Jerry,

    I’m looking to buy a 2012-2014 Dodge Charger R/T or 2011 Chrysler 300 C. I planned on only having 20k cash but here in New Jersey the dealers seen to stick to there pricing. How would you reccommend I approach this issue. I have my choice of the black car on black wheels look but not sure if many are available in my area.

    Reply
    1. Jerry

      Good to hear from you. The used car market is very good right now and dealers can stand on their price. I would set up an alert on AutoTrader.com with the criteria you are looking for including price. I’d set it to 100 mile radius, if you find the right car, it would be worth the drive. Every time one comes on the market that fits your criteria, it will email you.

      Good luck!

      Jerry Reynolds, President
      Car Pro Radio Network

      Reply
  10. Derek

    I intend to buy a 2014.5 Camry SE for about $21,500 before incentives. Should I go with the $1,500 cash back (and buy the car for $20,000 in cash), or take the $500 cash back and financing at 0% for 60 months? Thanks for your advice!

    Reply
  11. Mike

    Hi,

    This is a very informative website that you running here. Congratulations.

    I am in the market for used car for my sister. We just went thru things and she has spotted a car she likes on a website. She has given me the money(cash) for the purchase.

    What would be a textbook way of negotiating the deal on this car with or without considering financing for this purchase. In my eyes, i would rather pay for the car and that would be the end of story.

    What would you suggest I go about this deal with the dealership. By the way, I think the car is a trade in since its a different make than the dealership sells.

    thanks for your help.

    Reply
    1. Jerry

      Good to hear from you. No two dealers price used cars the same way. Your best bet is to search other vehicles in the area to get a median price for similar cars. Once you have that, you can make an intelligent offer. Often, dealers put their best price online upfront and won’t move.

      Be sure you look at a vehicle history report.

      Thanks for listening to the show.

      Jerry Reynolds, President
      Car Pro Radio Network

      Reply
    1. Jerry

      James, I am not quite sure what you mean. Shoot me an email from the website, I’ll be happy to answer you.

      Jerry Reynolds, President
      Car Pro Radio Network

      Reply
  12. Amy C.

    I have a bit of a unique situation, that I am looking for some guidance on. I am in the market for a 2015 Nissan Rogue, and the build I want is really uncommon (currently only one in the county over 1000 miles from my home), so I am going to have to have to car ordered by the dealer directly from Nissan. I am ALSO going to be a cash buyer. I am not sure how to handle the process of convincing the dealer to order a car and then drop the bomb that I am cash buyer upon delivery. Any thoughts?

    Reply
    1. Jerry

      Amy, good to hear from you. I am happy to help! Email me and let me know which market you listen from, I’ll recommend a good Nissan dealer that will take care of you. This should be easy. Jerry@CarProShow.com.

      Thanks for listening!

      Jerry Reynolds, President
      Car Pro Radio Network

      Reply
    2. Jerry

      Submitted on 2014/10/09 at 9:43 am | In reply to Amy C..
      Amy, good to hear from you. I am happy to help! Email me and let me know which market you listen from, I’ll recommend a good Nissan dealer that will take care of you. This should be easy. Jerry@CarProShow.com.

      Thanks for listening!

      Jerry Reynolds, President
      Car Pro Radio Network

      Reply
      1. Amy C.

        Jerry,
        Thanks for the reply. I don’t live in one of your listening areas, so I don’t think you will have a dealer connection where I live. I was hoping for tips on strategy. Should I deal with hassle of getting the car ordered, then when the car arrives inform them I will be paying cash OR should I negotiate the sale price at the time I order the car? I am afraid if I say “cash buyer” before the car is on the lot, I won’t have a chance of getting them to order it.
        -Amy

        Reply
  13. Mark

    Hey Jerry, I am looking at buying a Honda Accord Sport edition. Trying to get a 2014 model, late in the year with 2015 models becoming more available. Most dealers have their “internet price” around $22500. This one dealer who is a little far away, but not too bad, has an internet quote for $20500, way less than everyone else. What is good initial starting point for a price I should be looking for in the negotiation? I would also want to get a $400 remote starter, when should I mention getting that? Going to see a couple of dealers tomorrow. Thanks Mark

    Reply
  14. Paul

    Hi Jerry,
    Am buying a car out of state and the dealer is requesting a wire instead of cashier’s or certified check. I made a down payment but haven’t checked out the car yet (only pics). Am concerned about paying upfront without first test driving the vehicle, plus the dealer increased the price on the website even though they state that won’t affect my purchase price. What do you suggest: wire funds first or go to dealer with a cashier’s check anyway?

    Reply
    1. Jerry

      I would never wire the money with seeing and driving the car. I would take the cashiers check and if you wish, you can wire a small deposit to hold the car, but that’s as far as I’d go! Good luck.

      Jerry Reynolds, President
      Car Pro Radio Network

      Reply
  15. Dave

    Hey Jerry I stumbled on your website through a Google search. I was wondering if you can help me. My credit isn’t great actually it’s bad. I have $20,000 cash and a 2004 Lincoln aviator trade in (kbb value around $6500). I’m looking for a reliable suv for me and my family. The lincoln is great but since it’s a v8 it’s killing me in gas. I was interested in a kia sorento since I heard their warranty is unmatched. Also was looking at the Mitsubishi outlander sport & kia sportage. Preferably awd/4×4. I live in Philadelphia, PA. …zip code is 19136…any help would be greatly appreciated

    Dave

    Reply
    1. Jerry

      Dave, good to hear from you. I only have dealers in the markets my show airs in, so can’t help with a dealer referral. I think you are on the right track with Sorento, and I would consider Hyundai Santa Fe too, it has the same warranty. I think either of those would serve you well.

      Hopefully we’ll get to Philly before long!

      Jerry Reynolds, President
      Car Pro Radio Network

      Reply
  16. Marilou

    HI Jerry,
    Just stumbled on to your vehicle commentary page & I too have the same kind of question re purchasing a new vehicle. My 1st experience was horrible & the thought of repeating the same nauseating experience is preventing me from visiting any dealership. I am interested in purchasing a new Honda AWD CRV EX. I live in the Morris County area of NJ. Also, is it a better deal to purchase a 2014 or 2015? Your valuable guidance & recommendations are greatly appreciated. Marilou

    Reply
    1. Jerry

      Good to hear from you I don’t have any dealers in your area, so I can’t be of much help BUT I would shop by Internet with the closest dealers near you. If you can find a 2014, you’ll save money for sure. Work them against each other until you get the best deal.

      GOOD LUCK.

      Jerry Reynolds, President
      Car Pro Radio Network

      Reply
  17. Anastasia S

    Hi,

    The info above has been helpful to read. Just wanted to see what your thoughts were on the Chevy Volt and on financing it vs buying cash. I live in MD/DC/VA.

    Thanks for your help!

    Reply
    1. Michele Sanders

      The Volt is an awesome car, i’ve loved it since day one. IF you can pay cash, that is going to be cheapest way, other than leasing. There are amazing lease incentives out there right now, but it will depend on how many miles you drive per year.

      I wish I had a dealer near you to send you, but I don’t! Good to hear from you!

      Jerry Reynolds, President
      Car Pro Radio Network

      Reply
  18. Teresa N

    Hi, I am in an odd situation. I quit my job so I could move from here Bellingham Washington to Arizona to take care of my mother. I plan to buy an SUV before I go. I’m looking at Ford Escape, Subaru Forester & Hyundai Santa Fe Sport. I have a max of $24,000 to spend. Of course since I am unemployed I’d like to save as much as I can on this purchase. Do you have a dealer here in Western Washington? I have been looking at websites at various dealerships everyone seems helpful but it makes me dizzy trying to figure out where I am really going to get the best deal.

    Thanks, Teresa

    Reply
    1. Michele Sanders

      Good to hear from you. I would go with the Escape, for the money it is the best small SUV you can buy and will fit well into your budget.

      My closest dealer is Portland if you don’t have any luck locally. GOOD LUCK.

      Jerry Reynolds, President
      Car Pro Radio Network

      Reply
  19. Dell

    I’m looking at paying cash for a 2015 Mercedes, the sticker price is 39k, do you think they’ll accept a lower cash offer?

    Reply
    1. Michele Sanders

      Not sure which Mercedes you are looking at, but I would think there would be a little room there. If we have a dealer near you, check with them and that will make sure you get the best possible deal: http://www.carprousa.com/certified-dealers

      Thanks for listening!

      Jerry Reynolds, President
      Car Pro Radio Network

      Reply
  20. Jen Peterson

    Hi I live in Boston, Ma., and need to buy a used car. I have a budget of 13K and am looking for something small and reliable. I am pretty open in terms of make/model but low maintenace is key. I had a Toyota Rav4 and it was great but I live in the city and would now like something smaller. Can you suggest some cars to help me narrow my search? Thank you!

    Reply
    1. Michele Sanders

      Look at Subaru Impreza, it handles bad weather really well and you should be able to find one in that price range. If you decide to go SUV, look at Kia Sportage all-wheel drive. Either would serve you well.

      Thanks for writing.

      Jerry Reynolds, President
      Car Pro Radio Network

      Reply
  21. Rachelle

    I am looking to buy a 2015 toyota prius three do you have dealerships here in wilmington n.c or anywhere in n.c. I also want to get the best price for it.

    Reply
  22. Franced

    Hi, my son is in the procesx of purchasing a 1997 ford tarus, they have the car priced at $950. He wants to pay cash for it, do you think that is wise? Concerned mother. He is looking for a reliable ride to get back and forth to college.

    Reply
    1. Michele Sanders

      I would be VERY concerned about any car that costs $950. Something is very wrong, that’s why it’s so cheap. It has problems or is a total scam, either way, I wouldn’t touch it unless you personally know the current owner.
      Be careful!

      Jerry Reynolds, President
      Car Pro Radio Network

      Reply
  23. Susan

    I’m looking at buying a used 2013 Nissan Altima sedan 2.5 SL, app. 22500 miles. Internet price $19,973. The manager said he could give me between $1000 to $1500 for my 1998 Nissan Altima which has app. 235,000 miles on it.

    I am trying to make a smart buying decision. My position is this: have cash to pay out right, retired on disability, FICO score close to 650. I am 62 & plan on keeping the car for a very long time. What is the wisest course of action ~pay cash or pay 1/2 cash & finance the balance & invest remaining cash? Or look for another deal? I do love the Altima SL. I live in NC.

    Reply
    1. Michele Sanders

      Good to hear from you. Although low mileage, that price seems high to me for a 3 year old Altima. I think I would shop around a little OR try to get the price down to $17,500 at the most. I would pay about half down and finance the balance no more than 3 years, that will help get your credit score up.

      THANKS for listening to the show!

      Jerry Reynolds, President
      Car Pro Radio Network

      Reply
  24. tracy

    Hi,

    I really like your last comment as I can relate to Susan’s question with a few exceptions/questions:

    1. I have a paid-off 1998 mazda protege (153K miles) that was in okay condition (it was in a no-fault accident that damaged the frame; last yr the sun rusted the paint on hood; and most recently the engine stopped or something malfunctioning in it caused it to stop.) Rather than get it fixed, I have decided it’s time for another car. I am assuming I should donate the car, as I am thinking a dealer would not want it as a trade-in– is this accurate?

    2. I am also wondering about the pros/cons to going to a private, independent dealer vs. a large dealer. I have gone to a few private dealers who either want all cash or want you to pay the equivalent of a monthly payment each week for 2-3 years. Do you recommend private, independent dealers or large dealers? My only concern with large dealers is the add-on costs involved with paying business overhead and expenses.

    I like the idea of paying half down and financing the other half you mentioned above.

    Thanks.

    Reply
    1. Michele Sanders

      Good to hear from you. Your Mazda will be fine as a trade in, dealers trade for cars like your every day.

      You are better off with a new car dealer for sure, they have a vested interest in repeat business, and are more careful what they sell. Not sure where you are, but my dealers will take great care of you. You’ll find them all on this website under CERTIFIED DEALERS. Let me know if I can help.

      Jerry Reynolds, President
      Car Pro Radio Network

      Reply
  25. Darian

    hi i am looking to buy a 2015/2016 subaru wrx in cash i live in san diego if i offer a lower cash price will they take that offer?

    Reply
    1. Michele Sanders

      Much would depend on what the offer is. Dealers are not impressed with cash, it seldom helps get a cheaper price. There is an article on my Q&A page on this website that addresses this.

      Jerry Reynolds, President
      Car Pro Radio Network

      Reply
  26. Kim Nickells

    I found a car online. A 2014 Buick Verano Convenience, 40,000 miles on it.. The price was 12,500. The person I communicated with asked me if I was financing. I told him that I already had a pre-approved loan with my Credit Union. He said come on down. I loved the car, but when it came time to sit down, they wanted me to finance with them. I already took one hit to my credit getting the pre approval. I said no. He said they wouldn’t sell me the car without paying them the usual $1,000 rebate they usually get. They couldn’t match the rate that my Credit Union gave me to finance, either. So, over a $1,000 they let me walk out on a car that has been on their lot for over 90 days. Guess, I’ll keep looking!

    Reply
  27. Sandy

    Hi Jerry,
    I am looking into purchasing a 2016 Subaru Forester Limited with Navigation, Harmon Kardon Sound, and Remote Starter (among many other typically included options). The MSRP on the vehicle is $33,141. Can you tell me what you would consider a “great deal” to be from a Subaru Dealership?
    Additionally, do advise buying new or used? I have always been told that if you buy used you could be buying someone else’s problems. I am a single woman looking for a reliable/dependable ride. Your thoughts? Thanks for any and all advice!! 🙂

    Reply
    1. Michele Sanders

      Sandy, good to hear from you! Honestly, I can’t tell you on pricing with any certainty, but I do think it is a good idea to go ahead and get a new one. Subarus hold their value so well, a new one is not much more money and that way you can get exactly what you want. Not sure where you are located, but we have great Subaru dealers in most areas. Try to find one with Eyesight, that is a great feature. GOOD LUCK!

      Jerry Reynolds, President
      Car Pro Radio Network

      Reply
  28. Mary

    Hi Jerry. We live in the Atlanta area and are looking to buy a used car for our 16 year old daughter. We are hoping to find a Honda Fit, Toyota Corolla, Toyota Matrix, Toyota Yaris, Nissan Versa, or similar car, preferably a 2005 or newer with around 100,000 miles. She is very petite so we need something with a height adjustable seat. Thoughts?

    Does your advise on paying cash v. financing apply to buying a used car? It seems like that’s always the first question the salesperson asks. Is there any negotiating power if you say you’re going to finance the car rather than paying cash? Is there much “wiggle room” on used cars.

    Thanks!

    Reply
    1. Michele Sanders

      Thanks for writing Mary. All those are good car choice. I would consider a Ford Focus or Chevy Cruze too, your likely to get a nicer car for the same budget. Cash would be a good thing to do on a used car, that could get you a little better deal for sure.

      Check with my buddy John Bleakley the Owner at Bleakley Ford. He’ll be able to find something for you, and he’s a GREAT guy! Good luck.

      Jerry Reynolds, President
      Car Pro Radio Network

      Reply
  29. Jay

    I’m saving up to buy a Tesla Model 3 in two years. I’ve calculated I’ll have about $45,000 saved up buy then. WA recently made the first $32,000 sales tax free and am hoping I get some of the federal tax credit.
    Would buying in cash be wise or what would you suggest as an alternative?

    Reply
    1. Michele Sanders

      All Teslas are sold at MSRP, so how you pay makes no difference. Obviously, not paying interest is a benefit, so if you can, I’d pay cash for sure! I hope everything works out well for you!

      Jerry Reynolds, President
      Car Pro Radio Network

      Reply
  30. Bonnie Walker

    hi jerry, i listen to your sat. show on channel 1200 cibolo,tx .I am very interested in the cadillac srx and xt5. are they a good vehicles is one better than the other.. was thinking about cash payment but changed my mind after reading your comments about missi g out on special offers. could you please give me some help.

    Reply
    1. Michele Sanders

      Bonnie, good to hear from you. I have not had the XT5 but LOVE the SRX. I hope to have the XT5 soon.

      Reach out to my friends at Ken Batchelor Cadillac through this website under CERTIFIED DEALERS. They’ll take great care of you on either.

      Jerry Reynolds, President
      Car Pro Radio Network

      Reply
      1. Bonnie Walker

        thanks jerry bought the xt5 at ken batchlor they were ery helpful . cant wait to hear what you think about the xt5.

        Reply

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