The Pros and Cons of Paying Cash for a Used Car

Generally, when shopping for a vehicle, most potential buyers in Lousiville, KY, plan to do so by taking out either a car loan or an unsecured personal loan to finance the purchase. The affordability of a used car, however, is often enough to entice people to pay in cash, i.e. in full. This is usually the case for buyers who want to avoid high-interest rates or incurring unwanted debt. There are many factors to consider with both options when it comes to buying a vehicle. So, let’s explore some of the pros and cons of paying cash for a used car.

Benefits of Paying Cash for A Car

• Simple Process. Unlike a car loan, paying with cash simplifies the car-buying process. No credit checks or lengthy discussions regarding interest, monthly payments, payment frequency or term is required. You simply pay the dealer, and just like that, the car is yours.

• Selling Flexibility. When you pay with cash, you own the car title immediately. This can be particularly helpful if you want to sell or trade in your current car without fear of prepayment fees or early contract break fees. If you decide to sell your vehicle privately rather than through a dealer, potential buyers of your vehicle will also prefer to buy from an owner who has the title in-hand.

• Cost-Effective. Despite the higher upfront costs, purchasing a vehicle outright is usually cheaper as you don’t have to pay any fees or interest on the car. Plus, you may be able to negotiate a better deal since the dealer will have less paperwork to do.

• Lower Debt. Unlike a car loan, you won’t be increasing the amount of debt you have. Additionally, by paying the entire price now, you’ll have more of your future income available for other expenses. 

Drawbacks of Paying Cash for A Car

• Higher Upfront Cost. While a car loan takes away a certain amount each month, paying in cash means you’ll be out a few thousand dollars in an instant. This money might be better kept as an emergency fund in the event that any unexpected expensive costs come your way, or these funds can be built up for a downpayment on a home.
• Saving Up May Take Awhile. Saving large amounts of money takes a lot of time and dedication. For example, if you can save approximately $300 each month for your car and you need $12,000. That will take you approximately 3.3 years to save. Even if you were to bump up your savings to $600 a month, that would still take you 1.6 years. With a car loan, you can get the car you want at any point in time. 
• Won’t Help Your Credit Score. Paying cash means you won’t have an opportunity to build your credit. Auto car loans are a great way to build credit as it diversifies your credit profile and adds to your payment history. Having monthly payments that you pay regularly and on time can help keep you financially responsible while increasing your credit score in the process.

As a Lousiville, KY dealership run and owned by the #1 watched Car Salesman on the Planet, you can trust we know how to get you the best deal on a used vehicle that will last you for years to come, whether you decide to pay in cash or go for a flexible and affordable auto loan that meets your budget! We’re here for you before, during, and after the sale of your car. Even if you’re working with another dealer, we’re committed to protecting our customers. Browse our inventory of high-quality used vehicles today at Mike’s Car Store.