Most buyers finance car purchases simply due to the fact that new cars are expensive, especially luxury vehicles. If you have the cash available, however, then using cash to pay for a car is often a good option. Dealerships will take a cashier's check as payment for a car, enabling you to own it as soon as you drive it off the lot. To learn three reasons why buying a car using cash can be advantageous, read on.
1. Prevents You From Being Upside Down on an Auto Loan
The biggest advantage of buying a car using cash is that there's no risk you'll be upside down on your loan. You become upside down on a car loan when the car is worth less than the amount it takes to pay off the loan. This happens when a car depreciates in value faster than you're paying off the loan. Luxury cars and new cars depreciate more quickly than economy cars and used cars, so you're more likely to end up being upside down on your loan when you buy a luxury car or a new car.
Being upside down on your car loan hurts you financially if you're in an accident and need to file an insurance claim. Unless you have gap insurance with your auto insurance carrier (which will raise your insurance premiums), you'll only receive what the car is worth if it's totaled in an accident. You'll need to pay the difference between its value and the loan amount using cash from your own pocket. This can be a sizable amount for a luxury vehicle. When you purchase a car using cash, you will avoid running into this problem entirely.
2. Saves You Money by Eliminating Wasteful Interest Payments
Buying a car with cash allows you to avoid paying interest on an auto loan, which means that it's the least expensive option in the long run. If you have bad credit, you may be limited to auto loans with very high interest rates. You'll be forced to pay a large amount of interest over the course of the loan. Even if you have good credit and secure an auto loan with excellent terms, it's still cheaper to simply pay cash for the car and avoid interest rates altogether.
3. Simplifies Negotiations With the Dealership
When you're looking for cars for sale, paying for the car with cash makes negotiations at the dealership simpler. Having a cashier's check in hand when you negotiate makes it very easy to stay within the budget you've chosen for your car, as there's less temptation for you to choose car options or extended warranties that may cause you to go over your budget. Paying with cash also makes the transaction go more quickly, as there's no need to involve the dealership's finance department and see the auto loan that you're approved for. You can finalize the deal rapidly and drive out with your new vehicle without lengthy negotiations, which makes buying a car simpler.
While it may take a while to save up enough money to purchase a car outright with cash, it's often the best option. You'll never be underwater on an auto loan when you pay cash, and it also makes the sale simpler and quicker. Paying cash also makes it easier to look for cars for sale, as it limits your budget and allows you to narrow in on cars that fit within it. If you have the money available, you should consider making your next car purchase using cash instead of financing it.
Share13 December 2022
After I totaled my car, I knew that I needed to find a new vehicle that would weather auto body damage a little better. I started looking around for an incredible dealership that I could work with, and I was able to find a nice place that was relatively close to my house. They were easy to work with, focused on making my experience enjoyable, and had an incredibly large selection of great cars. Within a few hours I was able to find a really nice car that I loved, and I was really happy with the entire process. This blog is all about finding a great car that you will love.
