How to Negotiate a Car Price When Paying Cash
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How to Negotiate a Car Price When Paying Cash

By Jason Collins | September 6, 2021

The car buying process is exciting when you know your new car is right around the corner. However, even when fueled with excitement, some anxiety looms too because the process can prove challenging, especially if you are new to the process.

Car buying at a dealership makes for an often confusing and frustrating transaction. Usually, car buyers leave the dealership without their new car or drive away in a vehicle they paid too much for.

As common as vehicle financing is, you may have the funds available to purchase your vehicle in full without the hassle of an auto loan.

If you pay cash upfront for your purchase, you have more bargaining power for negotiations with the salesperson. We will guide you through how to negotiate car price when paying cash.

Why Pay Cash?

There are several benefits to walking into a dealership and paying cash for the car you want instead of taking out an auto loan with a monthly payment schedule.

The benefits include:

  • You will spend less money
  • Your budget is already disciplined
  • You have more power to negotiate the best price
  • Possible eligibility for a discount since car dealers appreciate the up-front payment
  • No monthly payments to worry about
  • No auto loan means you have the advantage of fighting depreciation

The biggest advantage to paying cash for your vehicle purchase is that you will spend less money. Not only are you more cautious about what you are paying, but you do not need to worry about paying any interest rates that accompany a car loan. Take a look at a car loan of $32,000 at a 6% interest rate over five years. Paying cash means you will save over $5,000 because you are not paying interest on a loan.

Paying with cash also limits you to the sticker price on the car. You may budget for paying exactly the price you see (unless you get that well-earned discount for paying cash). With the purchase price in mind, you may decline any add-ons and luxurious features.

Getting Started

Before heading out to shop for your next car, do your homework first to establish what the best car is for you. Decide what type of car you want and how much cash you have available to spend.

Establish the following, do you want:

  • A used vehicle or a new, out-of-the-box car?
  • A particular make and model?
  • An SUV, pick-up truck, coupe, sedan, etc.?
  • A fuel-efficient vehicle?
  • All-wheel drive?
  • A car with an existing warranty in place?
  • Specific safety and technology features and any add-ons?

Once you have a basic idea of what car you want to own, visit a car dealer and take one or two options for a test drive to help you decide if it is the best car for you.

Consider if you have a trade-in vehicle to put against your new car purchase. The trade-in could act as a down payment for your next car.

Once you know exactly what car you want to buy and your available price range, you need to do ample research on its purchase price and market value. Walking into a dealership with all your numbers handy will already give you an upper hand when you want to haggle the price of the car with the salesperson.

Use online resources to determine the market value of the car you want to drive away in.

You will retrieve a value to compare the manufacturer's suggested retail price (MSRP) against by using resources such as:

  • Edmunds: The Edmunds website refers to the market value of a car as the True Market Value (TMV) or Edmunds Suggested Price. The Edmunds Suggested Price is the recommended purchase price excluding sales tax and all associated fees. Edmunds also has a price checker tool for new vehicles if you want a new car instead of a used car. Their price checker tool provides a rating against your new car quote and will tell you if it is fair, good, or a great deal.

  • Kelley Blue Book
    National Automotive Dealers Association
    Remember to consider the cost of the car insurance on your chosen vehicle. Often, buyers are too enthusiastic about the new purchase that they forget about the car insurance expense. Sometimes the cost of the insurance alone may be a deterrent for that particular purchase, and the high price may send you back to the drawing board to help you find a more affordable car.

Now that you have your research in hand, you can negotiate! Let's discuss how to negotiate car price when paying cash for your next vehicle.

How to Negotiate Car Price When Paying Cash

Negotiating with Private Sellers

Buying a used car from a private seller may be an option since you are paying cash and do not have to worry about financing options - which a dealership typically handles better than a private party.

Bear in mind that a private seller may markup their car slightly higher than a dealership because they may have a target amount in mind or a settlement figure to reach should the car have a lien on the title. They also do not make a profit from volume sales in a month as a car dealer does.

If the seller is looking for an urgent sale, then the negotiation process may become a lot easier for you since they are desperate. On the other hand, if it is a casual sale, their asking price may be set, and the art of haggling is limited as they stay with their bottom line.

So, how do you negotiate with a private seller? Set your negotiation starting point first. Choose a set dollar figure that represents the absolute maximum amount you will pay for the car. Now select your starting price below that, and you can work your way up should the seller counteroffer your initial offer.

Here is an example: You have $8,000 to spend on a used car; that is the absolute maximum you can put forward against the car payment. You have found your used car; however, it has a price tag of $8,500. It is slightly out of your price range, but you may be able to negotiate with the private seller. If the seller is open to negotiation, start at $7,500. Now you can start bargaining if they counteroffer your $7,500. Make sure you do not go higher than $8,000.

Remember that when negotiating pricing with a private seller, you may get a lower price than a dealership, but you may not get any type of extended warranty with your purchase.

Negotiating with a Car Dealership

It may feel daunting when negotiating with a car dealership because you are dealing with an experienced car salesperson. But, do not let those car salespeople deter you from pulling into their car lot; there are some advantages to purchasing a car cash from a car dealer instead of a private seller.

It is easier to shop a range of vehicles from a dealer's car lot than searching through all the car listings from private sellers. This means that you automatically have a better chance of finding the right car deal for you at a better price.

Another benefit of dealing with a car dealership is that they are more likely to perform a basic vehicle inspection, and they can readily provide a vehicle history report.

So, how do you get started on negotiating a good price with a car dealership, especially when paying cash?

Here are some helpful tips:

  • Have your research handy of what a fair purchase price is for your chosen vehicle. Remember to consider your trade-in value too, as you will want to get a fair price on your old car. Knowledge is your best resource when negotiating with a car salesperson or a sales manager.

  • Revisit your budget so you have a realistic idea of what you can afford to spend.
    Determine the most realistic offer and establish your initial bargaining price and your maximum payment amount.

  • Be strategic. Do not come off too demanding because a car dealer may not be willing to negotiate in your favor. Go in too soft, and you may look like a pushover. You are not there to simply accept the sticker price as the lowest price possible, but you are also not there to be a bully. When you sit down with the salesperson, be polite, but be firm.
    Be persistent. If your offer isn't accepted, then don't wear out your welcome at the dealership. Thank them for their time and leave them with your number. Who knows, they may later consider your offer. If they don't, move onto the next car lot and start the process again.

  • Be prepared to negotiate all angles of the car deal. You can negotiate a better price on your trade-in while negotiating the best price for your new car. You can also haggle on the extended warranty if you see there is some wiggle room.
    Paying for a vehicle outright with cash doesn't always award you the opportunity of a lower price because some car dealers prefer the hassle of dealing with financial institutions and credit unions to arrange an auto loan. The deal can be signed, sealed, and delivered on the day without pre-approvals or delays in closing the deal. You may find that at the end of the month, a car salesperson may be more open to negotiating a better price so they can reach their monthly target, and cash will secure the deal happens before the month comes to a close.

  • With cash in hand, ask the car dealer for their "out-the-door" price on the vehicle; they may appreciate avoiding the discussions of monthly payments with a lender despite not receiving profit from securing the loan. Be sure to ask them about any new vehicle rebates too.

  • Do not haggle with an intimidating salesperson because negotiation should be a comfortable process for all parties involved. If you do not reach the car deal you wanted, walk out and try another car dealership. Car buying is a patient process; never go into it rushed.