Skip to main content

How to buy a car with cash

minute read

    Buying a car is a big purchase for most people, which is why so many opt to get auto loans. Still, you may be wondering if it’s possible to skip the financing and just buy the car outright. With that in mind, let’s take a look at how to buy a car with cash, as well as some of the associated pros and cons.

    5 steps to buying with cash:

    Whether you’re a seasoned pro or a first-time buyer, buying a car with cash is a fairly straightforward process. Like other large purchases, you'll need to consider pricing out the purchase, making sure you have enough money and then making your purchase from the seller. Simple enough, but when it comes to buying a car with cash, there are a few extra details to remember. Here’s a step-by-step guide:

    1. Save up cash

    This may seem obvious, but to buy a car with cash you’ll need … cash!  Whether you’re eyeing a used car or a shiny new one, you’ll probably have to start setting aside some money for it. You may even want to open a separate savings account and set up automatic transfers to help you save. This common banking feature can help you save money for your cash purchase.

    2. Find your car

    Whether you pay in cash or opt for financingshopping ahead of time gives you an idea of what you can afford. Additionally, deciding on the car (and any accessories) you want gives you a tangible savings goal to work toward. Individual needs may vary, but a few questions to consider asking yourself may include:

    • What kind of make or model do you need?
    • Are you looking to buy new or used?
    • Are there any extra features or add-ons you’d like to have?

    Finding your car might seem like it’d be the first step since it helps you set your budget. The reason building your savings is listed first, however, is because it usually takes more time to do. After all, you don’t want to find your ideal car just to let it slip away because you still need time to save for it.

    3. Learn to negotiate

    Congratulations, you’ve saved your money and found a car within your budget! You know you can afford the list price, but who doesn’t love getting a better deal? Learning how to negotiate effectively may help you save some money at the time of purchase.

    4. Get the car checked out

    Before finalizing the deal and revving up the engines, you may want to ensure the engines (and the rest of the car) can be revved. Getting a second opinion on the car’s condition from a trusted mechanic could save you some headaches later, especially with a used car. If that’s not possible, you may be able to use the car's vehicle identification number (VIN) to search online databases for service records.

    5. Pay with a cashier's check

    One of the more surprising things about buying a car with cash is that you may end up paying by check. We've all dreamt of dropping a suitcase full of bills onto a table, but in the real world, that typically doesn’t fall under the standard buying process.

    Cashier’s checks are particularly useful for large transactions, as their funds usually clear much faster than personal checks. Cashier’s checks also create a record of payment, and in some cases can be replaced if lost or stolen.

    Pros of buying a car with cash

    You may be wondering whether to buy a car with cash or finance instead. Saving up enough money for a car takes time and discipline, but if you aren’t daunted by either of those, there are certainly some advantages to it:

    Save money

    There are a few ways buying a car in cash might save you some money. By paying in cash and knowing that’s all you have, you’re less likely to buy more than you can afford or be tempted by extra bells and whistles you didn’t budget for. You’ll also avoid paying any interest, which can add up over the course of an auto loan.

    Fight negative equity

    Cars depreciate quickly, especially brand new ones. There may eventually come a scenario where you owe more on the loan than the car is worth. Being upside-down on your loan could make reselling trickier, but it’s not something you’d worry about when paying in cash.

    No monthly payments

    When you don’t have a loan, you don’t have monthly loan payments. When you buy a car in cash, you’ve got one less bill to worry about.

    Cons of buying a car with cash

    Buying a car with cash has its upsides, but it’s not without its drawbacks. Here are a few reasons you may not want to pay in cash after all:

    Depleting cash reserves

    Spending thousands of dollars at once can put a noticeable dent in your cash reserves. That means you have a lot less liquidity available for anything else — including any other purchases you were eyeing, and an unplanned emergency may become more dire without a safety net.

    Missing out on special financing deals

    Special financing deals apply mostly to buying from dealerships, where there are often special incentives and offers to bring customers through the door. Depending on the specific benefits of the deal, you may find that you’re paying less to finance than you expected.

    It takes time to save

    Let’s face it — not everyone has the time to put into building up a savings account. Maybe you recently got a new job and need a car immediately to start commuting or an unplanned expense came up, and you still need a new ride. While saving up is a commendable activity, financing exists to help customers who might not be able to pay in cash and are looking to pay for their car over a set period of time.

    In summary

    As you can see, knowing how to buy a car with cash isn’t as complicated as you may have thought. The journey of saving up enough money to pay entirely in cash can be arduous, but some may also find it rewarding. And if you find the all-cash method is not for you, you can typically finance some or all of your auto purchase.

    What to read next