What You Should Know if You’re Paying Cash for a Car

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Last week I fulfilled a goal I’ve had for the longest time. I got my first SUV and I paid for it in cash!

I’ve been saving everything from my online business, you can see those income streams on my income report, for over a year to get this girl and it was so worth it. She’s a beaut!

But because I don’t buy cars often, and have never paid for one in full at the time of purchase, there was a lot I didn’t realize going into it.

I did extensive research about the year, make, and model of the car I wanted. I found alternatives that were comparable, and Travis and I searched the internet for weeks ahead of time to get ideas of what the deal landscape was like.

Going into the dealership I felt confident, prepared, and supported by Travis. Then it came time to pay and there was a minute where I didn’t think we were going home with that car.

So I wanted to share my experience and give you some tips so your experience isn’t as stressful (or long) as mine was.

Finding The Right Deal

First, let me give you some context on our new car.

I wanted a small SUV as an upgrade from my Corolla but more fuel efficient than a 3-row SUV or minivan.

Cars depreciate most in the first 3-5 years so as it’s 2019, I looked at cars made in ‘14, ‘15, and ‘16. Of those years I looked at which small SUV’s were the top rated for those years. My number one pick was a 2016 Mazda CX-5.

For a while, I didn’t consider any other vehicle. But when it came down to it I also included the 2015 or ‘6 Honda CR-V and the 2016 Hyundai Tucson.

Those cars were all selling between $15K to $18K for the trim I wanted and gave me all the tech features.

After test driving all three I was pretty equally satisfied with any of them, so then the deal searching began.

We found a 2016 Hyundai Tucson about 45 minutes away from where we live. It was the highest trim package Hyundai offered, higher than I wanted to go, but the car was selling at the mid-trim price. It didn’t make sense, and that can be the makings of a good deal.

We’d been monitoring it all week and planned to look at it Saturday. Wouldn’t you know at midnight (the one every million Friday nights I was up at midnight) the price that was $16K all week, jumped up to $18K.

I was bummed but I called the dealership when they opened and asked why the price changed. The first girl I talked to had a blatantly rehearsed unhelpful answer so I asked to speak to a manager.

The manager was much more helpful. He told me that what many dealers use now is called Live Market Pricing. Which means a computer algorithm searches within 75 miles for comparable cars and automatically changes prices based on what other dealerships are charging.

So either a cheap Hyundai Tucson got taken off the market or (more likely) a very expensive one was newly listed and that changed the price of mine. I told him I’d drive out there for the original price but not for the current one.

I guess I unintentionally made it seem like I’d already inquired about it with the dealership so he agreed that if I came out, he’d honor the lower price since I’d already inquired about it.

So I basically started off the deal getting $2,000 off sticker, which is really rare because…

Cash Isn’t King

At least not at a dealership.

I’d heard about this turn in car buying but I wasn’t sure so I took to the good ol’ Reddit Car Sales forum to ask (I assume) a dude in the industry what negotiating with cash would get me and what wiggle room I had negotiating in general.

I got a lot of passionate answers, some more helpful than others.  

So at that point, I knew nobody cared about my cash and the most I was going to get off the sticker price was around $500. This proved true when I got to the dealerships.

The salesmen encouraged me to finance and use my cash as a downpayment and in negotiations, $500 is the most I could get someone down. And that was for cars that had been on the lot for at least 3 weeks. There was no negotiating with cars fresh on the lot.

So finding a deal before heading to the dealership was very important. According to Kelly Blue Book, my Tucson should have been listed at over $20K. I got them down from $18K to $16K on a technicality. That was a deal worth driving 45 minutes for.

ALL THE FORMS OF PAYMENT

I test drove it, loved it, and ultimately decided to buy it. Now came the hard part. Paying for it.

I denied the pre-owned certification and the extended warranty so after dealer fees, taxes, and tag stuff my total was $18K. I’d planned to put $5K on a rewards credit card and $14K on the debit card where I’d had my car fund.

Here’s how I ended up paying: $3K on the credit card, $10K from my car fund, $1K from my regular checking account, a check for $4K from my personal checking that the next day I called and canceled and paid the remainder from my car fund account over the phone.

Yeah. It was a long stressful process that, looking back, I should have and could have been prepared for.

So here’s what you should do to avoid my mistakes:

1. Find Out From The Dealership How Much You Can Put On Your Credit Card

We use credit cards for their travel rewards. We love them and they allow us to take great vacations for almost free.

Travis read somewhere that dealerships don’t let you put more than $5K onto a credit card, probably because they’re charged a percentage fee when you use one. However, we found out when we got there that’s not a universal rule. Our dealership actually only allowed $3K.

So if you’re planning to use a rewards credit card for your car purchase, ask what their limit is upfront.

2. Call Your Bank and Have Them Raise Your Limits

The dealership was crazy backed up when we were there. We were sitting in the back waiting almost an hour to meet with the finance guy (yes, you still have to work with the finance person and sign ALL their paperwork even when you’re not financing.)

When we finally got up to pay, my card that had more than enough money was declined. No one told me debit cards have daily limits! In hindsight, I was naive about that.

I was on the phone with Ally for a half hour waiting for them to increase my limit and they could only raise it to $10K a day for three days.

I could’ve easily made that call while I was waiting to sign the finance papers had I known I needed to make it.

3. Bring Back-Up Forms of Payment

If you’re doing the math that brings us up to $13K paid for my $18K car. Luckily Travis had his debit card for our main checking account because I don’t carry mine on me. We keep the balance low on that one so we were only able to put $1K on that one.

For our last $4K I, by the grace of God, had my checkbook in my Corolla. I always carry it with me because I don’t carry my debit card and ya never know when you’ll need a check right? Like when you’re trying to buy a car!

The dealership was able to accept my personal check after running a soft credit check to verify I didn’t have a history of bouncing checks. Thus bringing my total to $18K and I was [FINALLY] able to leave.

However, my clean history of not bouncing checks would’ve been tarnished Monday morning when they deposited my check because when I tried to transfer $4K to my checking account, it said the money wouldn’t show up until Thursday.

So I called and paid the last $4K over the phone since my Ally card limit was still raised. It took almost 24 hours but the car was finally paid for.

What I’d do Differently

I considered financing out of sheer frustration. But my pride ultimately kept me from it.

Banks don’t want you to make big purchases in cash because they’re making interest on that money sitting in your account. They’d actually prefer you finance a large purchase so you can pay them more interest on your new loan.

I asked our finance guy what it would cost, other than interest, to finance a car and he said for something like I was buying, around $100.

I still won’t buy a car unless I have all the money sitting in my account. But next time I’ll genuinely consider if it’d be worth the $100-$150 to finance a car and pay it off in a few months.

Not because paying in cash was that horribly difficult, but man, giving up all that money in one fell swoop was very difficult. Sometimes your sense of security is worth $100.

However, the one way paying for a car in cash really saves you money is by forcing you to stay in your budget. It also made saying “no” to the extras much easier. And the guys didn’t fight me on it because they knew if I didn’t have the money, I wasn’t getting the extras.

So that was my experience paying for a car in cash. I hope it helps you when it comes time for you to make your car purchase. While it’s a lot easier and cheaper to buy private party (and I highly recommend it, that’s how Travis buys all his cars) I wanted to go dealer for this one and I’m glad I did.

Have any questions or experience buying a car with cash? Drop ‘em in the comments!