22nd Dec 2010, 20:03
It's true that when buying new, you don't really save on purchase price by paying cash, but you do save on interest in the long run.
When buying used, cash can get you a better deal if you have good negotiation tactics. I always buy with cash, and have gotten some great deals because of it.
Usually if you can't buy it with cash outright, it means you can't afford it and are living beyond your means, like most of North Americans.
23rd Dec 2010, 06:33
I never took dealer financing. I have over the years used my credit union or my own bank. Now I pay cash. When eventually walked back to the credit manager, I decline all the high profit add ons they push as well as all the other packs.
Dealers make payments on cars themselves on their floor plans. When their inventory is checked, they pay for the cars sold. I think a lot of people think they dealers pay in full every new car they have on the lot that they sell. . Dealers may grouse, as there's no trade to make it up on, but my new truck is in my driveway.
When you pay cash, it's clearer what options drive your prices up. I found on a truck that many are not needed. I can do without cruise control and power locks etc. I have the comfort that if I get laid off, I have one less loan. My house is paid off. You can pay for 6 years and load up the options, but you still pay more When I see 2 window stickers on a new vehicle, I have one removed that a dealer added. I am willing to drive out of state, and I shop and tell them so. They try to give you the today only or hold you up, but I leave. Show the dealer 3 new quotes and tell them it's cash, no trade. You do not get a trade incorporated into a single page with your new car. And see the price circled with what you owe.
I also like the Internet manager; converse on the phone and tell them I am shopping. If you can pay cash, be patient and shop. If I had a trade in running bad, it's likely I would not shop around. So you pay. With cash it's great. Good luck.
23rd Dec 2010, 09:39
Oh man did you all miss the point? I didn't say no one has cash or that you can't buy a car with cash!
From a dealers point of view, cash makes little sense as profits go. They will make less on a cash deal than they will on a finance deal, period. End of story. They are there to make profits. Years ago, cash deals were looked upon as a good thing because they didn't have to deal with third party banks and such. Now they all have their own banks to deal with and make more money. Sure people get financed through their own banks and credit unions, but the norm is to let the dealer handle it and they usually will get you the best rate. I know there are exceptions to this before anyone posts back about that! Also, a small dealer that doesn't sell a lot of vehicles would probably be more inclined to jump on a cash deal and give a lower price with cash involved.
Look at it as if you are the dealer. Two people walk in. One has cash and one needs financing. Who are you going to try harder to sell to, knowing that you will have extra income from the financing? The only way the cash deal would be better is that you can whack them harder on the price. Again, I know there are exceptions, so I am sure someone got a killer deal paying cash out there!
The two dealers I worked for would jump on a cash deal only to make a killing on it and drive the price up. They weren't going to gain anything for financing, so they took the chance in the deal itself. Sometimes you gotta come down, but most people with cash in hand are easily swayed as they can drive away immediately with their shiny new vehicle. You know the old saying "this cash is burning a hole in my pocket". Okay, I know there are people that are savvy out there... before the angry posts come up again. You'd be surprised though at just how many people out there pay sticker for their cars with no negotiating and no arguments!
23rd Dec 2010, 09:50
Yeah, everyone has $20K plus laying around for a new car. This is true for smaller things, but most people aren't in a position to just walk into a dealer with cash these days. I know plenty of well off people that aren't living beyond their means, and they finance their cars.
That actually wouldn't be the smartest route even if you did have that much cash. You can get at or close to 0% financing on many new cars these days, and invest the cash over the five years. To blow $20K+ on a depreciating asset is not a smart move by any measure.
24th Dec 2010, 14:36
Very good point, but when you choose the 0% interest, the dealer drops any discounts, so you really save nothing.
27th Dec 2010, 17:46
9:50 With your theory, the only way to not blow 20k plus is to not buy at all. Whether you save up the 20k or pay at least that plus interest as payments, you blow the money on the "depreciating asset" new car.
28th Dec 2010, 04:03
9:50 Whats the difference if you save up for 5 years and have $20000, or make payments for 5 years and pay $20,000, or likely more than that amount with interest? Plus, if you save and invest the money with interest before, and sell your car outright vs a trade as well... you walk in and have no payments. I figure I will have minimal repairs after I pay cash for a brand new car and commence saving (no payments at all) from day 1 for the next one.
28th Dec 2010, 07:21
Yeah, 0% means you pay no interest! Most companies are offering no interest loans these days, and you surely have your pick over who you buy from to get that good of a deal.
You then invest the $20K in stocks or an IRA, and then you'll make more over the long run... simple economics!
29th Dec 2010, 11:11
I suspect this will ultimately change over time. That is unless car makers can succeed in squeezing more economy out of larger trucks. The fact of the matter is, that some of the newer V6 engines in some of the full size trucks, are getting close to the same fuel economy as 4 banger. That, and in many cases these V6 engines have more horsepower and torque than V8's made 10-15 years ago. Sure - Americans love their full size trucks. But in the future, even 25MPG is going to cost a lot of money in terms of fuel costs. If anything, I wouldn't be surprised to see hybrid or even plug-in electric options for full size trucks.