• Buying Guides

How to Negotiate a Car Price When Paying Cash

By Melissa Spicer | March 7, 2022

Sometimes buying a car makes it feel like you’re at the mercy of the car salesman when it comes to getting a good price, but when you pay cash, the ball really is in your court. Cash truly is king, and this is doubly true when you have cash in hand and are ready to plunk it down to pay for your car, truck, van, or SUV in full.

More than anything else, cash gives you a lot of bargaining power when negotiating with the car salesman to get the absolute rock-bottom new or used price on the car you want.

Although financing a car is the more common option, if you have the funds to buy in cash (or can get them), then you have a lot less hassle to deal with when buying the car you want or need.

Let’s run down why paying in cash can be a lucrative endeavor and some tips and tricks for negotiating to get the car you want for less green.

Why Paying Cash is a Good Idea

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.

1. You'll spend less on the car you want: Because you are not relying on a car loan to pay for the vehicle you need, you will not be paying any additional money for your car by way of interest, so your car costs less overall.

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.

2. You already know what you can afford: This makes finding a car within your price range an easier task, and there are no monthly payments to contend with.

3. Negotiations are more effective: It’s easier to negotiate with cash in your pocket since you know what your limit is and the salesman knows you’re a serious buyer. You may have heard that cash talks, and this old adage holds true when you are paying cash for a car. If you have cash, the salesman set up and listen, since they are looking at a guaranteed sale. This means they’re usually willing to budge on the asking price

4. There is a potential for discounts: Because of the upfront payment without the wait, some dealerships are likely to knock some off the purchase price just for cash buyers or offer other incentives for buyers.

5. Pay the exact sticker price: 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.

6. You don't need a fabulous credit score: If you're paying cash, nobody cares about your credit history, so the process truly is no-haggle in many respects.

Things to Look Out for When Paying Cash for a Vehicle

Preparation is key to negotiation when for cash buyers. 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 prior to shopping for your next car. Ask yourself, 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?
  • An electric vehicle?

By reviewing the features that mean most to you, you can be better prepared to negotiate to get the car you decide to buy. Also, 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 (or at least test-drive).

Where to Find the Value/Price of a Used Car:

  • 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.

A Helping Hand: Some Apps to Try

When searching for a car to buy for cash, it can be helpful to the negotiation process to browse many cars from various dealers and private parties.

Some apps to consider to help you in your quest for a great deal on your car purchase:

  • Autolist: Large, high-def photos and a huge catalog of listings pulled from dealerships and used car apps make the Autolist app a must-have for all car shoppers. Be sure to check out the Buyer Intelligence section of listings that interest you to see how the price of the car your want compares with other similar vehicles in your area, price history changes, and how long the car has been available for sale—all useful factoids when you’re shopping for your new car.

  • Edmunds: The calculators and other tools on the Edmunds app make it a quintessential tool for car shoppers. Use the app to find a breakdown of expenses for cars you are interested in, such as average repair costs and such.

  • Kelley Blue Book: The app from KBB is a good jumping-off point for pricing information on all types of new and used models.

  • CarGurus: Their new Sell My Car function makes it easy to list your car and sell it to a verified buyer with verified funds and direct deposit.

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

Negotiating a 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? As a car buyer, 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 from Carfax or some other similar site.

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

Best Practices and Tips for Getting a Good Deal

  • 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 or invoice 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 on to 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.

  • If negotiations fail, don’t get discouraged. The car market is vast, and negotiations and the car buying process should always feel friendly and comfortable. If you can’t come to a deal on the car you want, don’t feel bad about walking away and starting from scratch with another dealership or seller. Be patient and the deal you want will come your way.