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I'm planning to buy a 2- or 3-year old car in cash. I expect to pay around $15k. I'll probably buy through a dealer because I can't find any private sellers in my area with the type of car I'm looking for.

My question is whether and how I could use a cash purchase to my advantage. I have bought several houses in cash and know that that is a big advantage because it makes for a speedier transaction, and one that is less likely to fall through unexpectedly. Therefore, house sellers are more inclined to work with cash buyers.

But when it comes to buying cars from a dealer, I have read that paying in cash can actually put you at a disadvantage, because dealers want to be able to sell you a car loan on top of the car.

Is that true? If so, how could I mitigate the issue? Could I say that I am going to buy with a loan, and do the financing through the dealer, then back out of that promise and say I'll pay in cash once I have settled on a price for the car?

Relatedly, does it matter to dealers if I can say that I can buy the car immediately, without them having to wait on my loan processing or worry I won't get approved? I'm guessing that these things are not a big deal to them because my sense is that a car loan (unlike a mortgage for a house) doesn't usually take more than a few days to process, and most people are able to get one unless they have exceptionally bad credit.

Thanks in advance for any thoughts.

Keep It Simple without needing to deceive them.

1. Negotiate a lower price by financing.


2. Make sure that there's no prepayment penalty!!


3. Pay off the car on the first due date.

I have read that paying in cash can actually put you at a disadvantage, because dealers want to be able to sell you a car loan on top of the car.

I believe that premise to be incorrect, and also this has not been my experience. Every time I've purchased a car, the purchase price is set and agreed upon before I step into the finance office (meaning they don't know if I'm going to finance or pay cash yet). With a fixed price, once you step into financing, it's the finance manager's job to make the dealership additional money above and beyond what the sales team accomplished. They do this by getting you into a profitable loan, and trying to add on warranties, service contracts, and upgrades. So basically you can say whatever you want during negotiations (e.g. "I'm going to finance, I have OK credit, go ahead and skin me on the rate if you want, etc"), but as long as you sign on a purchase price, if you walk into the finance office with your check the deal is done. Just make sure to negotiate on the purchase price "out the door" (including all fees and taxes) and not a monthly payment.

If you want to pretend to finance because you believe that might help, then maybe you can word it this way, "What will be the exact dollar amount of my loan?"

Does buying a car in cash put you at a disadvantage? No matter, disadvantage probably isn't the right word and it's not in your best interest to assume an outcome. There's no law against asking if the dealer benefits from writing a loan while you're negotiating the price.

The hardest part of negotiating a car is getting the dealer to discuss the price of the car, not the financed monthly payment. Get a financial calculator app for your phone, learn how to derive a payment amount and principle amount from the relevant variables. But assuming every sob story about a bad car buying experience is coming from a similarly competent buyer is a waste of your time.

There are some dealers that are really loan brokers. The car is just a commodity used to sell loans. The first car I ever bought from a dealer very clearly wanted to also sell the loan. I bluffed and told them I was pre-approved by a credit union for X% (which was much better than their first attempt at a loan offering) which they very agreeably matched.

There are some dealers that shoot specifically for manufacturer sales volume incentives. They just want cars to transact, they don't particularly care about the price of the specific cars, they make their money on volume bonuses.

There are some dealers that are the lender. That dealer never really actually wants to sell the car. The car works, it's sold for a down-payment to someone who can't pay the loan. The car eventually gets repossessed and sold to the next person who can't pay.

The last time I bought a certified pre-owned car the dealer could not have cared less about how the car was paid for. They didn't hardsell extended warranties and gap insurance and lojak either. Does every single Audi dealer operate that way, probably not. Would the experience have been the same if I was buying something new from the same dealer? I don't know; maybe. Does that mean a Toyota dealer down the street is the same? Or an independent used car dealer?

Dealers aren't all the same. Transactions aren't all the same. You can be blunt while still being respectful. Cash or loan indifference makes you a good candidate for the best price for that car from that dealer.

You hold a very good hand when buying car with cash because you are only interested in the final price. Therefore, many of the financing tricks they will use do not apply. You need to know what a good price for the car you want to buy is, so research your local market and what value certain options should be worth. If at the end, the paperwork does not agree with your negotiated price, walk away.

The dealer will absolutely try to get you to use financing. They will even say that you should get a loan now and just pay it off immediately a month from now. Ignore it. Stay firm and insist that they don't need to run credit checks and you will only use cash. For new cars, they will say you are ineligible for certain cashback discounts. Again, this doesn't matter because you are looking for a bottom line price. You can mention that you prefer a clean title if it helps them stop. The important thing to show that you are a no-nonsense buyer and they should just come to a deal fast and get you out of there.

But when it comes to buying cars from a dealer, I have read that paying in cash can actually put you at a disadvantage, because dealers want to be able to sell you a car loan on top of the car.

I don't know that it's a disadvantage, per se. If you're buying a new car there's typically an incentive to take out a car loan from the car company's bank. They provide the dealer an incentive to promote those. If you're amenable to it, you can always take out the loan (typically there's no up-front financing charges since they make their money from you buying the car), pocket the incentive, and you can pay the loan off before you pay any significant interest. You can often come out ahead in this type of situation if you play your cards right.

The real power of cash is in being able to walk away. In a world where most people are slaves to a credit check ("Hey, we'll work with you if you don't have good credit"), they know you can easily go elsewhere to get a better deal. Get offers from multiple dealers and be prepared to shake hands and walk out. I had to do this on a van I bought recently. We had mostly cash and I knew they were overcharging me for a trailer hitch I wanted added. Sure enough, the next day the car salesman had found a way to bring that down to a reasonable amount (they contracted with a nearby aftermarket installer instead of installing in-house).