Buying a new car is an incredibly exciting experience. Whether you are buying a brand-new car directly from a dealer, or you are buying a new-to-you car from a second hand dealer, it is always exciting, and you should enjoy every second!
But, if it is your first time buying a car, then you might find yourself overwhelmed by all the different things that you hadn’t previously known.
There is lots of jargon that comes with buying a car, and something as simple as paying for the vehicle can cause a lot of confusion.
Depending on the dealer that you are purchasing from, and the cost of the vehicle you are buying, you may have different payment plans recommended to you.
One of which will probably be paying cash for the vehicle. While this is a valid option, it is one that you should never do. So, let’s take a look at why you should never pay cash for a car.
What Is ‘Paying Cash’ For A Car?
First things first, let’s take a look at what ‘paying cash’ for a car is. If you are new to purchasing a car, then you might not have heard this term before, so let’s take a look at what it means.
If you choose to pay cash for a car, then this is one of the most straightforward methods. There isn’t a long list of boxes that you have to tick to be able to buy the car.
You can simply walk into a dealership, choose a car that you like, and potentially drive away with it the same day. Some people expect this convenience to make paying cash for a car the better option, but this isn’t the case.
You might expect ‘paying cash’ for a car to require you to physically have cash to the total amount of the vehicle. While you can do this, in most cases to pay cash for a car, you will simply have to have the total amount of cash for that car available in your bank account.
The money can then be paid to the dealer via bank transfer. In short, paying cash for a car simply means that you can pay for the vehicle in a single, outright payment.
Is Paying Cash For A Car A Good Idea?
Now that you know what paying cash for a car is, you might be wondering if it is a good idea.
This is a guide to why you should never pay cash for a car, so you have probably already guessed that it isn’t necessarily a good idea. But that being said, there are some things that make paying cash for a car very appealing.
One of the most appealing things about paying cash for a car is that that car is then immediately yours. You do not owe any money on that car, you have paid it outright, so you are completely responsible for it.
Due to this, you do not need to worry about monthly payments to the dealer, and your credit score will not impact your ability to buy the car.
Something else that people find attractive about paying cash for a vehicle is that you completely avoid interest rates. Payment plans for vehicles come with heavy interest rates, and this means that you will pay a lot more for the vehicle than you initially wanted to.
But while these are both attractive features, we still wouldn’t recommend paying cash for a vehicle.
Do Car Dealers Like It When You Pay Cash For A Car?
The main scenario where you may pay cash for a car is if you are buying it from a second hand dealership. The cost of vehicles in these kinds of places are generally a lot cheaper, and a lot more affordable, than buying a brand-new car.
This makes the possibility of paying cash for the vehicle a lot more achievable.
Car dealers recognize this, and so they may push for purchasers to pay cash for their cars.
Paying cash for a vehicle is a lot more convenient for car dealers, and they know that if you pay cash for that car, then the sale is secured.
If you ask to pay via a finance plan, then there is always the possibility that you may not qualify for it, and so the vehicle sale could fall through.
So, yes, car dealers do like it when you pay cash for a car. They wouldn’t want all of their vehicles to be bought with cash.
But they will want a certain amount of vehicles to be bought in this manner as it guarantees the sale, frees up space on their forecourt and gives them instant cash.
Why You Should Never Pay Cash For A Car
While buying a car with cash can seem very appealing, for all the reasons we have looked at so far, you should never do this.
Of course, it isn’t ideal to have a lot of monthly payments and debts build up against your name, but most finance experts suggest that you should never pay cash for a car. This is because you will lose a lot of your consumer rights.
When you buy a car on finance, your consumer rights will be somewhat protected. If you pay for a small portion of the vehicle on your credit card, then your purchase will be more protected than if you pay cash.
For example, if you simply put $100 of the cost of the vehicle on your credit card, your purchase will be protected should the company go bust before you receive the car. You will not only be protected for the $100, but the rest of the money that you pay for that vehicle too.
When you are buying a car, it can be easy to assume that everything will be fine, but this often isn’t the case. Especially if you are buying from smaller companies.
Using finance plans is often frowned upon, but when it comes to vehicles it is always the better option because your purchase, and your money, will be better protected.