Quick Answer: Is It Better To Pay Cash Or Finance A Car?

Quick Answer: Is It Better To Pay Cash Or Finance A Car?

The common thinking is that buying a car with cash is better than financing because you won’t have to pay interest.

After all, with a cash deal, you pay exactly the price shown and no more.

The best example is if you qualify for a favorable interest rate.

Do car dealers prefer cash or financing?

But that’s not how car buying works. Dealers prefer buyers who finance because they can make a profit on the loan – therefore, you should never tell them you’re paying cash. You should aim to get pricing from at least 10 dealerships. Since each dealer is selling a commodity, you want to get them in a bidding war.

Why is car finance cheaper than cash?

How can buying through finance be cheaper than paying with cash? When you buy a car through a finance agreement, the expectation is that it’ll cost more than laying down a lump of cash because you’ll be paying to borrow money. Often that’s exactly the case. The result makes buying through finance cheaper than cash.

How much cash should you put down on a car?

This means buyers who want to finance the purchase of a $15,000 used vehicle should plan to put at least $1,500 down. Lenders may require more money down on a new car than a used car to offset its quicker depreciation. Typically, an initial payment of 20 percent or more of the purchase price is wise.

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