Never offer to pay cash for a car — Here’s why

Offering to pay cash is NOT a good negotiating tactic — it actually hurts your chances of getting a good deal

Here’s why you should never offer to pay cash for a car: Dealers make less money when you pay in cash. So trying to negotiate by saying, “I’ve got cash and can buy right now,” will get you nowhere with the salesperson.

The finance department at a car dealer is a profit center, just like the service department. They make money on financing your car purchase. When you offer to pay cash you’re actually creating a DISINCENTIVE for the dealer to give you the best price. Paying in cash lowers their overall profit.

When the salesperson asks if you want to finance, say “probably”

That way they think they’ll make more money on the deal. Once you agree on the price, you can always pull out your checkbook when you get to the finance person’s office. Or, you can take out the loan and immediately pay it off.

What you want is the best price on the vehicle and to do that, you want them to think they can make up some lost car profit by getting the financing.

Some people think offering to pay cash for a car gets them a better price — it doesn’t

Some people think that offering cash upfront proves that you’re a motivated buyer. It only proves that you’re a naïve buyer and you don’t know how to negotiate. If you’re really motivated to buy, prove it by engaging in an earnest negotiation and keep telling them you’re ready to buy if you get the right price.

When it makes sense to pay cash for a car

First, consider paying in cash ONLY after you’ve negotiated the best purchase price. Then, when you get into the finance person’s office, consider paying cash ONLY if you meet these criteria:

• You’ll have enough cash left over to cover emergency expenses and still have some savings left over
• You can’t afford a monthly payment
• Your credit score is already high and you don’t need to improve it

When it makes sense to finance a car

• The carmaker/dealer is offering a low-interest loan that’s less than what your money is earning in the bank/investments.
• Your credit score is low and you want to improve it by getting a car loan and paying on time.
• You don’t have the cash and aren’t planning any other big credit purchases in the near future. The loan will automatically reduce your credit rating.

©, 2022 Rick Muscoplat