4 reasons to buy a car with cash

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With today’s historically low interest rates, more and more people are financing their vehicle purchases. Car expert Edmunds reported that the average new car payment in 2015 was $483 while the average used car payment was $361.

While it might seem like a good idea to take advantage of low interest rates and finance your car purchase, there are some good reasons to purchase your next car with cash instead.

Read more: Fewer people are buying these cars, which means great deals for you!

Paying cash for a car can get you a better deal

In the world of auto purchases, cash is still king. Especially when it comes to used car purchases, auto dealers and private party owners alike would rather see cash for a car purchase than have to wait for auto loan paperwork to go through.

Paying cash then translates into more buying power. Sellers are more likely to negotiate and agree to a lower price when they know they’ll get their cash on the spot.

Paying with cash helps you keep your spending in check

It’s easier to be coaxed into spending more on a car when you’re only looking at the affordability of the monthly payment on your financed loan. The 2015 Edmunds article reported that “The percentage of used vehicles financed for 73 months to 84 months increased by 14.8 percent from the second quarter of 2014 to reach 16.1 percent — the highest percentage on record.”

In other words, people are stretching out the term of their auto loans in order to make the payments more affordable.

It makes sense then to reason that if monthly payments can dupe a person into spending more than they initially planned on for their car, buying a car with cash will help a person to spend less. There’s something about handing one’s hard-earned cash over for a purchase that makes you think a little bit longer about whether or not the purchase is right for you ‘ especially when it comes to bigger purchases such as auto purchases!

By choosing to only spend a certain amount of your cash on hand on a vehicle purchase, you can help avoid the temptation to keep up with the Joneses and ensure that you’re not parting with any more of your money than you really want to.

Repairs are often less costly on a less expensive car

Since you’re spending less on your car purchase when you pay with cash, it stands to reason that you’ll likely also have the pleasure of cheaper repair costs on that car. Newer car repairs often come with higher repair costs. And don’t be fooled into believing the warranty will cover everything; it often doesn’t. Even bumper to bumper warranties or third party extended warranties don’t cover normal wear and tear items such as brakes, fluid changes and tire replacements.


A less expensive car that’s paid for with cash will also leave you void of a monthly payment so that you have extra cash each month to make repairs with should you have to.

Paying in cash helps you avoid opportunity cost loss

When it comes to auto loans and credit cards alike, there’s the problem of opportunity cost. Opportunity cost is what you miss out on thanks to debt payments and the interest costs that go with them, not to mention the interest you lose out on earning because you’re not investing the money that you’re paying toward your debt each month.

Opportunity cost is a big deal. If you do as the others do and pay $483 a month for your new car for a term of 84 months, you’ll be out $40,572. On the other hand, if you invested that money over the same 84-month period, you’d have an investment account worth $48,943, which means that your new car had an opportunity cost of nearly $90,000.

4 reasons to buy a car with cash

What better things could you think of to do with $90,000 than put it toward the purchase of a car worth less than half that amount? Would you travel? Pay off your mortgage? Give to charitable causes that are important to you? Put the $90k in your early retirement fund?

Paying cash for a less expensive car means more money in your pocket to do the things you love to do, whether that be save money, travel, give money away or make a dream purchase that matters much more to you than driving around in an expensive car. The less you spend on your car ‘ and the less time you spend making car payments ‘ the more opportunity you have to work toward financial freedom and chasing the dreams that truly matter to you and your family.

So the next time you’re in the market for a new-to-you car, consider bucking the system and paying cash for a quality used car that will serve your transportation needs. You’ve got better things to do with your money than to spend it on monthly car payments. Use your cash to reach for your financial dreams instead.

Read more: 5 things to know before buying a used car

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