Paying for a car in cash is a great way to escape from lots of interest from Loans but often overlooked due to the inconvenience of going around with huge amount of money. Every purchase process starts with finding the product of your choice and engaging in negotiation.
Most times, buyers prefer to take loans but paying in cash allows you to conclude the financing aspect once and for all. This guide contains detailed information on how to pay for a car in cash as well as other financing options available.
How to Pay For a Car in Cash
When it comes to buying a car, most people are presented with three payment options – by cash, loans or credit card. Each method has its own pros and cons, and if you decide to pay with cash, you will have to save over a long period.
Paying In Cash
Before going to your bank to wire all the money in your savings, you want to ensure you’ve decided on the type of car to buy. Also, you want to check the withdrawal limit of your bank as some banks place a limit on withdrawal.
Secondly, the price for an average car can go for as high as $200,000 hence pulling the fund from an ATM isn’t actually a good option due to the limit placed on it as well. Like every buyer, you’re bound to have issues with taking a briefcase full of cash around. For added security, you might want to request a cashier check at your bank and fill an application so you can withdraw the fund at once.
Usually, banks will charge a fee for cashier check but might offer the service for free if you’re a regular customer. However, it’s still possible to get this done if you’re not the bank’s customer, but it’s recommended you do it at your own bank to minimize charges.
If you prefer to pay cash for a car, you can also make a transfer rather than taking cash in a briefcase around. All you have to do is transfer the fund from your account to the dealers account at once. However, you will have to give the dealer your banking details to initiate this transfer. Due to the issues that can arise from this method of payment, only large dealers allow you to pay for a car using transfer.
The guide walks you through the steps involved in withdrawing with cashier check.
Why You Should Consider Paying cash For A Car
You will spend less
No doubt paying for a car at once from your savings will empty your bank account. The thought of your account reading something close to a zero will sometimes prevent you from spending big on a vehicle. After all, with loans, you pay in bits.
However, what most people fail to understand is that what you’re paying most times is the down payment. As long as the car possesses all the qualities you want, you shouldn’t think twice before making payment. After all, with loans, the interest piles up prompting you to spend more.
You Enjoy Discounts
This depends on where you buy the car. For instance, if you patronize a private seller, the vehicle usually goes for far lower than the dealers’ price. In some cases, The dealers might increase the price if you’re not willing to pay up immediately.
With your cash, the dealers might be willing to lower the price to recoup his money at once. In the case of used cars, dealers are eager to sell below the fixed price if they find a buyer that’s willing to pay in full.
The obvious advantage, paying in cash has over loan is that you do not have to deal with interest rate. For instance, if you take a loan of $500,000 to buy a car, the interest rate could go as high as 5% which could amount to extra $50,000 at the end of the repayment period. Bear in mind that you must have reached a certain level of creditworthiness amidst other factors to gain access to such amount.
Usually, the higher the amount, the higher the interest rate.
Taking Out Loans to Buy a Car
One of the easiest ways to finance a car is to take a loan. Sometimes, your car dealer might offer you a discount if you pay with loans, but this is just meant to sweeten the deal. No doubt, paying via loan gives you an edge. You’re able to make payment as quickly as possible rather than saving up for years.
When it comes to choosing between loans and credit cards, it’s always better to go for the former. This is because it has a lower interest rate and less risky. To take car Loans, you have to present collateral, so the lender can take ownership, in case, you default in payment. Hence, we advise you not to take loans more that you can pay for, just so you don’t end up in debt.
Lastly, most lending organizations will always access your creditworthiness before a loan is issued. They usually put your annual income into consideration. They might also have to go through your past records to determine whether you’ve been defaulting in any form of payment.
Learn the things you need to apply, for a car loan here.
How to Pay For a Car in Cash – The Cons
The biggest disadvantage of paying cash for a car is that it will limit your choice. You might have to go for a used car rather than a new one considering the amount involved. Even when you’re willing to pay in cash some dealers might not accept considering the risk involved.
Secondly, draining your financial account usually create a negative financial mentality. You have little left in your account and the thought of being in the “red zone” spreads fear all over you.
If you believe that paying for a car in cash is the best option for you, you should take some measures to ensure the transaction goes well. First, find out if the dealer accepts cash before showing up at their shop with a briefcase full of money. Secondly, if withdrawing the fund for the car from your account will leave you in the red zone, you’re better off considering other options. Considering the reasons outlined here, do you think is wise to pay for a car in cash? Drop a comment. We will love to here from you.