Is it suspicious to buy a car with cash?

Is it suspicious to buy a car with cash?

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Have you ever walked into a car dealership and bought a car with cash outright? What was the reaction? Were the authorities called in? Did anything funny or weird happen?

Buying a car, with “cash” has 2 meanings:
1) you’re paying literal cash, as in briefcase full of green bills.
2) you’re simply buying the car, outright, with no financing (check, wire, transfer).

So, Buying car using cash may not be suspicious but the dealers may not like it. Dealerships make money – a small amount – on every car sold. 

They make a bit more on financed vehicles, but the financing is done by the corporate arm of the manufacturer for new vehicles, for people with good credit.

If you go to a dealer to buy a used car, or you have bad credit, you will be looking to get financing through the dealer’s affiliated bank – and that’s where you will pay big money.

Dealers negotiate less on credit purchases and leases, but when the loan is through an affiliated local lender, the dealer gets a kickback. This isn’t illegal, and it’s why that bank is “affiliated”.

So, Is it suspicious to buy a car with cash?

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The cash is no better than a cheque, and the only thing that bringing a large amount of cash will do is make the dealer nervous that you are dealing in counterfeit, stolen, or drug money

It does satisfy that one unknown that you may not have enough money to afford the car you are looking at, but if the dealership is that nasty, take your business elsewhere.

It’s still liable to cause problems – most dealerships don’t have the means to deal with such large amounts of cash – they may have a safe on the premises – but chances are that they would have to make special arrangements to deposit the cash immediately. 

Are You looking for a New/Used car? Check the list of Best Car Finance companies in the market as per your needs

That’s a risk that some dealerships may not want to take.

Dealerships make money on the extras – a bit on extended warranty (most of that goes to the manufacturer).

But they make huge profit on paint sealer, rustproofing, fabric/leather protection, window tint, after-market immobilizer-style alarm systems, as well as the infamous set of all-weather floor mats which can be had for a better price from any third party companies.

Window tint is worth it if you live in the hotten and sunny climate areas – dealers get it done at places which specialize in it and it will be of higher quality. 

Same with rust-poofing if you live in the colder areas ( North) – if they use a waxy-type spray that doesn’t need touching up, it’s worth it. 

The worst thing is after-market tire warranties and Nitrogen-filled tires – not worth the paper it’s printed on.

The thing is that $40k does not buy you very much new vehicle – but it can get you a credible used vehicle or make a big down payment on a new one. 

Coupled with a trade-in, you could use this tactic to negotiate a new vehicle purchase – i.e. your trade-in vehicle is worth maybe $20k, and you have $20k in cash, and you want to buy a vehicle worth $50k.

You only pay tax on the net-value of the sale so there is the advantage of trading in with the dealer. 

Go at the end of the month and buy an in-stock vehicle with a lot of similar stock. 

For example, a mid-level Ford pickup truck – the factories make more than they can sell – so try and leverage the end-of-month sales quota requirement.

Remember that the dealer doesn’t own those vehicles – a bank does – and the bank is paid by the number on the lot at the end of each fiscal month.

So again, your best bet is to use that $20k on a pre-owned vehicle, preferably one of the dealer’s own models and a “certified pre-owned type”. 

Use your cash as your budget and don’t go over. If you do need to go over, you can at least leave out the taxes and registration fees, but negotiate hard for this.

It just means you are more serious about the deal and getting it done today – assuming you already have your target vehicle in mind.

This will do you no good when attempting to buy a very expensive vehicle (where the $20k is less than a quarter of the price) or when you are doing a factory order.

Pay no attention to what former (and present) car salesmen tell you

There’s a reason why that business has a bad reputation, and it’s because car sales tends to be as phoney as a three dollar bill.

In Australia New law banning cash transactions of more than $10,000 – and buying a car from a dealer could land you in jail for two years 

  • Paying more than $10,000 in cash to a car dealer could soon see someone jailed
  • The government is flagging a two-year prison term for buying a vehicle this way
  • The Assistant Treasurer said it would still be legal to buy a car in cash privately  

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How car selling dealers make money.

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The key to understanding the answers you’re getting is understanding how the people in the car selling process make money.

Sale of the car – could even be a loss lead

Service and maintenance – lots of $ over the 10 years you may keep the car.

Financing – interest on the loan

You also have to remember that there are separate transactions you are involved with – buying a car, trading-in an old car, and financing.

These are 3 separate profit Points  and why they make sure you navigate to different people for each of them.

You’re thinking you’re getting an integrated process where you can negotiate a good deal where as what’s happening is you’re being put through 3 separate negotiations where each sales person is trying to get the most out of you.

Each person is incentivised to make money from you – that includes selling you financing. Divide and conquer.

Do they want your cash? 

No. They want your cash along with interest payments over several years. 

That’s stable cash flow for the business and it’s more cash flow. 

Getting a large lump sump up front is not really desirable from a cash management stand point.

Are You looking for a New/Used car? Check the list of Best Car Finance companies in the market as per your needs

Many Dealers may not take cash

A lot of dealers won’t touch that kind of cash for two reasons. 

1) they think it could be the proceeds of crime or some kind of money laundering thing.

2) They want you to finance so they make even more money.

Corey Cole says 

“I spent about six hours at the dealer buying a car with “cash” (writing a check for the full price) once. 

They insisted on going through all the financing and credit paperwork even though I wasn’t financing it. 

And of course they kept trying to sell me add-ons I didn’t want.

Still, that was better than the previous dealer we visited that tried bait-and-switch on me (offering me a great price on a Dodge Grand Caravan, but actually selling me a much smaller Caravan for the offered price).

“Yes, we can offer you this price, but only if you buy it right now. If you leave the dealership, the offer is off the table.” “Ok,” said I, “then it’s a big ‘No.’” The salesman couldn’t believe it, kept chasing after me as I was leaving.

I might well have come back and bought the car if they hadn’t tried that power play on me.


I Spoke to  cars  salesperson Sierra Watson at one of the biggest dealerships on East Coast Sydney.

According to her “What people need to realize is that no one really cares how you pay anymore. 

You WILL save the most money if you finance and pay it off early, especially if you’re buying a new car. 

With new cars, the manufacturer, I work for Mercedes, puts out rebates.

Mercedes puts out a TON of rebates on each car and they change each month.

Here’s the catch, you can’t get those rebates without financing with the manufacturer. Rebates also include military rebates and recent graduate rebates.

So the answer is, don’t buy a car in cash.

What the salesperson recommends to the customers is that if you want to pay off the car right now, finance the car, pick up the cash rebates, and then when your first bill comes in, pay it off. 

I’m not sure about all manufacturer financing but Mercedes doesn’t have a payoff penalty. 

Even If there is, it could be just few Hundred dollars, which is way more than the Interest you are going to save by paying off early.

So all in all, buying a car in cash isn’t what it used to be and it’s not easier.

When paying with a personal check, we still have to check your credit so we know the check won’t bounce, so it’s honestly just easier to finance and save money.

So please, don’t be that person that expects a crazy deal just because you have cash or a check.Most dealers  physically cannot do it.

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Why paying cash for your car could be an expensive money mistake

A automobile is a devaluative asset and you should never borrow to acquire a depreciating asset. The advise never to finance a car is.

But this combines two problems that lead to confusion:

The decision to buy (must I buy a car? And at this price I should buy this automobile and

The choice on funding (do I have to pay cash? Or do I have to take a loan out? And that’s the correct loan?)

Rather, what you should do

You can’t pay cash if you acquire a new (or near new) automobile and you have other debts (or you probably own the car throughout the term). 

However, make sure the correct vehicle loan is received at the proper price.

Why is it important?

I encounter many folks who suffer from cash stress and the main causes are too much home and too much vehicle in relation to their income. I work as a money coach and advisor.

There are several essential rules to follow when it comes to purchasing a car:

You will probably be better off utilising an equity vehicle service such as GoGet if you drive fewer than 5,000 kilometres a year, reside in an urban location and use it not for commuting.

If you purchase a car, get the cheapest automobile for your ego – and never spend more than the 3 months’ wage for your daily drive (gross income before taxes).

Keep Your car as long as possible:

But you’ll be better off getting a vehicle loan than paying cash if you buy a new (or near-new) automobile.

However, make sure the correct vehicle loan is received at the proper price.

It’s the depreciation:

Most automobiles have the highest cost of depreciation (Value Decline), and the higher the cost, the higher the value. 

The first year is the most costly one, even though the maintenance expenses are somewhat mitigated.

New automobiles are also safer and cheaper to operate. The depreciation rate then progressively decreases, until after 10 years the amount drops out of the cliff.

The RACV states that the cost to own a core car (such as a Hyundai i30), which accounts for roughly 40 percent over five years from new, has been depreciated.

Only 12 percent of interest even if the purchase price is borrowed.

The joy to buy vs. the difficulty to pay

Whenever we buy anything, we pick out against the agony of payment psychologically.

If both things are broken off in time, we are reacting differently.

So we spend more on using credit cards and why we get better off on a prepaid trip than if we pay when playing.

Also Read: What are the pros and cons of buying a used luxury car?

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