Buying a car with cash can be tricky, and if you don't know what you're doing, it also can be dangerous. While it's true that cash buyers might get better deals with certain car dealers, the truth is that car buyers need to be careful.
There have been many cases in which would-be buyers went to a private seller with cash, only to be robbed. There have also been moments where cash buyers got the car but were later accused of not paying. Both of these can lead to financial problems, assault, or even jail time.
On dealership lots, cash buyers have had moments where they were baited and switched — or even had fees make it impossible for them to get the car they wanted without a loan.
So, if you're going to use cash, you need to know how to buy a car with cash the safe way. Here's the scoop.
Before you choose to buy a car, you're going to need cash, first.
Most people who buy a car with cash do so by saving up for one. If you have done this, you're good to go.
However, you can also buy a car with cash by getting the car loan before you hit the dealership lots. This is actually the most advisable route because it can reduce the chances of dealerships pulling a fast one of paperwork, and also forces them to be more accommodating with car prices.
That being said, you will need to amass some cash in one way or another before you learn how to buy a car with cash.
Use the cash as a bargaining chip.
Part of the reason why people want to learn how to buy a car with cash is because of the bargaining power it offers them.
It is in a car salesman's best interest to have you drive away with a new car. They don't want to keep their car on the lot; they want money. Knowing that you can literally plunk down cash and drive away will make them more willing to negotiate on the car price.
If the price (plus tax) is too much for you to afford to pay cash on, talk to them and ask them to drop fees for you, or to lower the price so that you can pay for it in cash. If they refuse, walk away. You can and will find a dealer who will be more willing to cooperate.
Most private sellers will agree to drop the price, but many dealerships will try to be more rigid about it. However, this is one of those things you need to stay firm on because it's an indicator that they want to rip you off. Remember — any dealership that insists on loans is not a dealership you want to talk to.
Buying a car using cash from a private seller may have an extra step or two you need to be aware of...
Sales tax is a thing, folks. Most dealerships will take care of it for you if you pay cash by simply lowering the price of the car in question until it's affordable.
If you're buying from a private seller, you will need to call your DMV to find out who you're going to be paying sales tax to. In certain states, the seller needs to be the one who's legally liable for the tax. In other states, you'll pay the sales tax to the DMV when you're getting your paperwork straightened out.
Either way, it's a good thing to know and prepare for. That way, you won't be caught off-guard if the DMV asks you for more money during the final paperwork processing.
Only bring a small amount of cash with you when you decide to do the transaction.
All the other procedural rules on car buying apply. You still need to inspect the car, haggle, and do your homework. Cash buying doesn't make you immune from being fleeced by a lying salesman.
Whether you are going to a private seller or a dealership, you will still want to bring a small amount of cash as a good faith deposit. This shows the seller you're serious, but also doesn't put you at risk for anything.
Do not bring all the cash in a briefcase or any other mafia-style moves you may think will get you a car. This will put you at a high risk of being robbed, and frankly, it's just a tacky, reckless, and bad move.
The right way to pay for a car with cash is to write a check or use a certified money order.
As stated before, paying for a car with cash is not a good move. Money gets "lost" with unscrupulous private sellers, and in certain rare cases, unethical car dealerships. To ensure that there is a money trail, it's best to pay with a check or money order.
From personal experience, most debit cards will not allow you to spend more than $5,000 on a single transaction if you live frugally most of the time. So, if you decide it's time to sign off on the car, leave the deposit, ask for them to follow you to a local money order venue, and issue out a money order to them as they complete the paperwork.
Always ask for a receipt, the signed title, and a fully itemized paper detailing the tax you paid — if any — to the dealership or seller.
If it sounds involved, it's really not. In fact, it's actually fairly easy to do. Once it's all done, you will have learned how to buy a car with cash through experience.