Home Car Shopping Buying a Car with Cash: Everything You Need to Know in 2024

Buying a Car with Cash: Everything You Need to Know in 2024

Quick Facts About Buying Your Vehicle Using Cash

  • Before buying with cash, decide if the economy and your situation make it a comfortable decision.
  • Paying cash for a car means no monthly payment, and you stay within your means.
  • Purchasing a car with cash means it’s difficult to return it should something go wrong.

Get to know the pros and cons of paying for a car in cash. We break down everything you need to know to make the right decision when buying an automobile with cash. Use the skip-ahead links below to move to the section you need.

Should I Pay With Cash or Finance a Car? 

Car financing and car loans

First, you might wonder, should I pay cash or finance my vehicle? Before we get into the question of cash versus financing, a little background is in order for shoppers who haven’t had much experience buying a new car.

Here’s the deal when it comes to buying a car. You can either finance the vehicle with a loan and pay it off over time or choose to pay cash upfront. That means you’re free and clear of interest and monthly loan payments.

One good reason why some people buy cars in cash is that they can afford to. And when it comes to knowing which is better to do, it comes down to knowing what’s better for your personal situation and finances.

However, do weigh the parameters of the deal. The reason is: Car dealers sometimes offer special cash bonuses or low interest rates for those with good credit. At times, dealers even offer 0% financing. If you think you can get more bang for your buck by investing the money you would put toward a vehicle, it’s a consideration, especially if your finances look good with ample cash flow.

For example, say you want to buy a 2024 Subaru Impreza with a starting price of $22,995 before destination charges, taxes, and fees, and you can afford to purchase it with cash. If you want to spend your savings, that’s great. It means no car payment for you. But let’s say you shop around for interest rates and end up with 6% financing for four years after a $5,000 down payment.

In that case, you’ll keep your leftover $17,995, and while you have a car payment, the total interest comes to $1,102. You must ask yourself whether it’s worth $2,879 to have that $17,995 in your bank account rather than tied up in your car. Most people would rather have the money in the bank or invested, where they can likely earn back the entirety of the loan’s $2,879 cost.

[Editor’s Note: I have bought and sold over 30 used cars during my driving life, and I used cash every single time. It is the best negotiating tool. When you can flash actual cash, your offer has legitimacy. Cash is the ultimate closer. — Jason Fogelson, senior editor]

What If I’m Purchasing a Used Car With Cash?

As a rule of thumb, buying a used car means you’re saving money out of the gate. The reason is that new cars depreciate when buyers drive them off the lot.

When you buy a used car, paying in cash also brings more savings on the offer price most times. That is, except for pickup trucks, which retain their value. One of the most significant savings for buying a used vehicle comes if you can leverage your cash for a discount on the purchase price while negotiating, just as you would with a new car.

For a used car buyer, weighing the cost benefits to your bottom line is crucial. For example, would paying for the car outright deplete all your cash? And how long would it take to build up your cash reserves in case of an emergency?

If you prefer to pay cash, research used car prices before purchasing because it will help you negotiate the best deal — and remember to ask for a cash discount price. We’ll get into more on that later.

Another consideration is the monthly payment difference for a new vehicle versus a used one and how that works within your budget. Used cars may need more repairs down the road, especially if there’s no warranty on the vehicle.

But dealerships often provide extra warranties on top of existing ones, especially if you purchase a Certified Pre-Owned vehicle.

However, when you buy used from a dealership, don’t expect 0% financing. It’s more common to see lower interest rate inducements or other deals, such as no payments for a few months. However, temper your expectations if you do not have good credit.

Also, remember you will still pay extra for the used car during the life of the loan.

Pros of Buying a Car With Cash

  • Discounts. Paying for a car with cash often brings leverage during negotiations.
  • No car payment. Paying cash upfront means no monthly car payment expense. That’s a big deal if you suddenly lose your job or another expense needs addressing.
  • Spend less money. There’s no monthly payment or interest when you buy a car with cash. You pay for it upfront. That means you spend less money, including on interest payments and any potential loan fees.
  • Buy within your means. You live within your means when you purchase with cash, and it’s a smart budgeting decision.
  • Power. You get the upper hand in the deal when you pay in cash for a car. It also means you can easily walk away if you do not feel satisfied.

Cons of Buying a Car With Cash

  • Financial hardship. If you need money suddenly for an emergency and your reserves get depleted, it can cause a budget crunch and put your finances at risk.
  • Few to no discounts. Dealers sometimes offer cash discounts to buyers who finance a vehicle. When you pay cash, those disappear.
  • Miss out on financing deals. If you qualify for a favorable interest rate, paying cash may not be the smartest thing to do because you’ll lose very little money by financing.
  • Return policy woes. Most dealers honor returns for cash buyers, but check your contract because if you pay in cash, you might not have any recourse if you need to return the car.
  • Missed opportunity. If you could invest the cash for a greater return instead of buying the automobile, it’s a missed opportunity. For example, you could spend the money instead on a project in your home or an investment.
  • Not building credit. When you buy a car outright and pay with cash, you miss the opportunity of building credit, which can help with other loans down the road.
Person hugging car hood

How to Research What a Car Should Cost

Once you weigh the pros and cons of paying for your new or used car with cash, it’s time to research car costs.

Tools to Help You Research Car Costs

When researching the cost of a car, it’s important to know that, like other retail goods and services, prices can get marked up or down. For vehicles, it’s important to know the invoice price range or what the dealer pays for the car from the manufacturer. Then there’s the window sticker price or the manufacturer’s suggested retail price (MSRP).

As a consumer, you will not know the exact invoice price. But Autotrader offers tools to help you determine the markup price of the vehicle you want to buy.

Start by researching a specific vehicle make and model on Autotrader. On the site, you will find car MSRPs. Then, use the car valuation tool. It helps you know the vehicle’s fair market value once you key in the make and model you’re considering. You’ll find a suggested purchase price based on factors, including the car’s popularity and the spread between the base price and invoice price. Understand that you could pay a little less than the car’s value or a little more, depending on market conditions. Either way, this tool accurately represents where you can expect to be.

Using both tools helps you determine new and used car values and points you to actual vehicles listed for sale.

TIP: Don’t lose sight of your car buying criteria. Keep in mind reviews, lists, and comparisons to refine your search.

Understanding Trim Levels

Trim levels, sometimes called grades, offer different versions of the same model with different features and equipment. For models with several trim choices, automakers usually offer as many as four versions. Sometimes, they offer additional choices.

For example, the 2024 Chevrolet Equinox comes in four versions: LS, LT, RS, and Premier. As trim choices increase, so does the cost of the vehicle.

A great way to learn about trim packages is to read reviews. There, you can compare and contrast and see what others think.

Car Features: What to Consider 

When searching for the right vehicle that works with your budget and needs, you’ll also want to consider available car features and if you want to add those. Those features or options could be anything, such as a head-up display, keyless entry, blind-spot alerts, heated or cooled seats, a premium sound system, and more.

Knowing what to look for in features depends on what you need and what your budget allows.

When looking at added content, try packages that bundle popular options together. Bundling can help save you money.

Car keychain and cash on top of a sale document

How to Buy a Car With Cash

Once you’ve selected the car you want to buy, take these steps to complete the deal.

Things to Do

  1. Negotiate the final price. Don’t settle on paying with cash or even mention it until the final price is negotiated, especially at a dealership. Holding back may net you a better deal at the dealership. From there, use your skills to negotiate an even better deal when you bring cash to the table. See below for more tips on negotiating the price.
  2. Prepare payment. The safest and most secure option for paying for a car in cash is a cashier’s check drawn from the bank’s funds, not yours. You can also use an escrow service if purchasing a used car from a private owner. Keep all your transactions safe by never giving out banking or personal information. TIP: If your cash transaction exceeds $10,000, budget time to fill out some extra Internal Revenue Service paperwork (Form 8300).
  3. Don’t forget insurance. Even if you’re paying cash, you still need car insurance. Be prepared ahead of time and pick out your insurance before driving.
  4. Pay and pick up the new car. Don’t drive away without a bill of sale, the latest emissions certificate, and the car’s title. Dealers will handle all this for you. With private sellers, it’s your responsibility to get the paperwork done.
  5. Final paperwork. At a dealer, registration, tags, and taxes get handled before completion. However, if you purchase from a private seller, you must still register your vehicle, pay taxes, and get your tags. Check your state’s motor vehicle agency to determine what you need to register the car.

MORE: Legalities When Buying a Used Car From a Private Seller

Things to Avoid

Check out these things to avoid when going about researching vehicles.

  1. Focusing just on price. When factoring in the cost of the car, look at more than the bottom line number. After you weigh the differences between cash and financing, consider that no matter how you pay for your car, there are always gas, maintenance, repair costs, and car insurance to consider. Use this quick tool to figure out Geico car insurance costs. Then, compare with other insurers before making a final decision.
  2. Scams. Watch out for selling scams. Look out for deals that seem too good to be true. If you’re not comfortable, walk away. Check out online reviews of small dealerships before shelling out money for a deposit, let alone a car.
  3. Fraudulent sellers. If a seller doesn’t own the title, find out why and be willing to walk away from the deal. Use these tips for spotting fraud and get a vehicle history report from a reputable source like AutoCheck or Carfax before buying a car.
  4. Not researching the value of your current car. If part of your deal involves trading in your car, get the estimated value of your existing vehicle before you walk into any dealership. That knowledge helps you know what the dealership likely will pay you for your trade-in. It also allows you when budgeting for a new or used car.
  5. Not getting a used car checked by a mechanic. For a used car deal with a private seller, be sure to get the car checked out by a mechanic. If a seller offers a mechanic’s report, do your due diligence by checking out reviews of the shop. You can also double down and get your own assessment.
  6. Car dealers with no solid reputation. Stick with reputable dealers who treat customers fairly and equitably. You can also check dealer ratings on Autotrader and read other online dealer reviews.

Tips for Negotiating the Price

Use these tips when settling on a price for your vehicle.

  • Compare other models. When settling on the price, compare other models. Exploring other options, including older models, helps you stay on budget while getting the extras you want.
  • Avoid buying extras. Extended warranties, window etching of a VIN number theft protection, key fob protection, tire nitrogen costs, paint and fabric protection, and windshield, tire, and dent protection are just some of the add-ons dealers will try to upsell during the sales process. You often don’t need these protections, so weigh them carefully. Before any decision, ask your car insurance provider what add-ons cost, like windshield protection. For example, a windshield protection add-on can cost less than $10 extra per year and often comes with a lower deductible.
  • Ask for the price upfront. Yes, dealers use this tactic to lure buyers into the showroom. Also, it’s a safety net for you to see the price first. However, it gives you a starting point to negotiate a car if you pay with cash. If the vehicle will be financed, never give out the car payment range you would prefer. Seeing the price first allows you to keep the upper hand during the deal while buying within your budget.
  • Consider no-haggle pricing. Many shoppers wonder if no-haggle pricing truly comes without the haggling. In a word, yes. But it’s a fixed price. It makes the process easier, but it’s probably not the best price a dealer offers.

RELATED: How to Buy a Used Car from a Private Seller

Final Tips

It’s a great feeling when you finally put your foot on the gas and purchase the vehicle. A word of caution, however. Buying a car isn’t like purchasing a refrigerator. It’s more difficult to return a vehicle if something goes wrong. When paying in cash, it’s also more difficult to return a car to a private seller.

That’s why doing research and taking your time helps prevent these situations. Still, things can happen, or the car could be a lemon. Read on to know what you can do.

Steps to Take to Return a Vehicle 

  • Start with the dealer. Reputable dealers generally prefer to make good on a sale rather than read bad reviews on social media.
  • Consumer affairs. Your state’s consumer affairs division can be another great place to start if you aren’t satisfied with the dealership.
  • Lemon laws. Laws exist in every state in the nation. Some states offer protection to consumers with used car lemon laws. Know what your state’s Lemon Law says even before buying the car. Read more about returning a vehicle.

Editor’s Note: This article has been updated since it was initially published.


  • Should I finance a car or pay cash?

    There are many pros and cons when buying a car with cash. The same goes for financing a vehicle. If you saved your money and prefer to own a car outright, buying a car in cash could be right for you because you will be living within your means and saving money by not paying interest. However, when you finance a car, it’s possible to obtain a car financing deal that could outweigh the benefit of paying for a car in cash, with the added benefit of building your credit.

  • How to pay cash for a car

    Since hauling large sums of cash to a dealership is risky, the safest way to pay cash for a vehicle at the dealership is to pay using a cashier’s check.

  • Is it better to pay cash for a used car?

    When buying a used car with cash, weighing the benefits and drawbacks before deciding is best. Once you weigh those things and how a cash outlay for a car would affect your financial bottom line, you can make the decision that works best for you.

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  1. If I want to effectively pay cash for a car but the dealer incentives make it more enticing to finance, and assuming there are no penalties for paying off the loan early, doesn’t it make sense to finance and pay it off when first payment is due?

    • You’re right, Robert. Dealer and manufacturer discounts and incentives typically apply to the initial transaction. So, assuming the lender doesn’t require an early-payoff fee and there’s no upfront loan origination fee, you could pay the loan balance in full, which would be the price after discounts or cash-back incentives. However, consider taking the deal if you can get 0% financing and hold onto the bulk of your cash for a while.

    • I got the $10,000 in incentives on a 2023 Challenger and paid it of with the first payment. I paid $158 in interest.

  2. It completely depends on your personal situation and finances. If you have the cash and want to be free of monthly car loan payments, it’s a great way to be debt-free. If you think you can invest that money and make a better return – which is entirely possible – by all means, that may work better for you.

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