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Should I Pay Cash for a New Vehicle?

By: Tracy Wilkinson - Updated: 7 Oct 2012 | comments*Discuss
Should I Pay Cash For A New Vehicle?

Buying a new car is not just a case of laying down a huge amount of money for a lump of steel and glass - it's an emotional experience that most of us like to get involved in, choosing the type of car that we want, down to model, the style, the colour of the car and of course the extras such as a sunroof, a CD/MP3 player and interior seat and furnishing colours.

Negotiation with Salespeople

The perfect scenario for car salespeople is that you will find the car of your dreams and fall in love with it - right there and right then. A canny salesperson will know when this has happened and will capitalise on it and of course it can put you at a disadvantage - but there are a number of things that you can do to keep negotiations open. One of the most effective ways to negotiate is to tell the salesperson that you will be making your payment for the vehicle you choose in cold, hard cash.

Will the Dealer be Happy that I’m Paying in Cash?

Knowing that a buyer is stood right in front of them, with cash in their pocket, can make a dealer lean towards ensuring a better deal, adding extras and bringing down the overall cost of the vehicle. If they know you can just walk away and pay cash for a vehicle somewhere else, then it makes sense that they are going to try and get you to buy one of their cars, rather than let you go and spend your money elsewhere.

However, it all rests on how you go about it. The flip side of paying cash for a new car is less encouraging. If you tell a dealer upfront that you are planning on paying cash, believe it or not it can lead to the dealer to pushing UP the price of the vehicle you want to buy.

In many cases, dealerships make more money on their vehicles by selling them through their own finance packages, so if you tell them that you are going to pay cash upfront then it can tempt them to up the price of the vehicle to cover any costs they may lose in finance. The best way to get around this is to be 'woolly' about how you are going to pay - just say you are as yet undecided and get a number of quotes - once you've agreed on a tentative price you can then mention that you are thinking of paying by cash and see if you can negotiate some extras or perhaps some money off for a cash price - there are no guarantees, but it's always worth a try!

Benefits to Paying in Cash

It can give you much better bargaining power:As mentioned, if you have cash-in-hand then you can turn the salespersons visual tactics around and use them to turn the tables! When they know you want a car, they’ll use that knowledge to encourage you to buy it. You can do the same thing, simply by making sure they know that they will have a fistful of cash if you decide to buy the vehicle.

It can give you power over the final deal:If you are taking finance out from the dealer, it allows them more power over getting the car ready for you. If you are paying cash and you want the car on Tuesday, it’s likely it will be ready for you on Tuesday. If you’re paying by finance, it will usually be ready when the dealership says it is ready.

No paperwork, no waiting to see if you’ve been accepted for a loan:We all hate waiting for the results of loan applications and finance deals to come through – even if we have a great credit rating, it’s always a nerve-racking time. In most cases, you can turn up, hand over the cash and pick up your car – although you will still have to fill in legal documentation, there will be far less for you to check and sign if you’re not taking out finance.

It can work out a lot cheaper:Once you’ve added on interest payments, and admin charges, paying cash can save you a fortune when you buy a new car. Of course, you won’t ever have to pay overdue charges or fines for missing a payment either.

No restrictions:With some car deals, you aren’t allowed to do certain things while you’re still paying for your car. In some cases, you can’t modify the car in any way that affects its resale value. Neither can you sell your car while you’re involved in a Hire Purchase or finance deal – if it is an available option (sometimes it isn’t) you will normally have to buy yourself out of the any finance deal before you can sell – which can end up being extremely costly.

All in all, paying cash is a great way to negotiate to get what you want out of a car dealer, but you do have to be careful about when you let the dealer know how you intend to pay. If you’re clever, then paying cash for your new vehicle means you have more control over the car you end up with and the deal that you make.

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