How to get the best deal when buying a car with cash

While it may seem like the ultimate 'baller' move, reality throws in a few curveballs. But that's not to say that you won't encounter a similar situation, one where you have saved up your hard-earned money, and you are in a position to purchase a vehicle outright, a cash purchase, so to speak.

 

There are a few considerations though:

 

• No dealership will accept more than R25 000 in cash. Anything more and the dealership is required, by law, to report such an instance. Most will reject this gesture and the associated paperwork by asking you to EFT (Electronic Funds Transfer) the money rather.

 

• Financing a car may be the better option for several reasons, one of which is the improvement of your credit rating. Purchasing a vehicle with cash has no impact on your credit score and may make applying for future loans (home or otherwise) considerably more difficult. Banks want to see that you can manage a repayment before lending you more money.

 

• While a bank-guaranteed cheque or EFT still counts as a cash transaction, you may not get a better deal when purchasing with cash, and the dealership will most times prefer that you finance a vehicle.

 

The reason for the final point listed is that dealerships are encouraged to push for finance agreements with an incentive scheme put in place by the banks. This can vary from a percentage of the purchase price to a cut of the interest charged. In this way, purchasing a vehicle with cash reduces their potential profit and makes poor business sense.

This means that you are unlikely to get a better deal if you walk into a dealership and say that you want to pay cash for the car. With their margins already hurt, they may not give you any more discount than they would be prepared to on a finance deal.

 

Using a portion of the cash you have saved as a deposit, you will be able to not only bring down your monthly repayments but may be able to afford a more expensive model than originally intended. Indeed, a large deposit is the best way of getting the most from a purchase deal. That way, the dealership can get their reward from initiating a finance agreement (encouraging them to negotiate on the purchase price), you contribute to your credit score, and bump up your purchase value, all while maintaining a comfortable monthly repayment.

Naturally, this is a different story when you are not buying a car from a dealer, used or new. For private sales, the negotiation process can be a minefield of courtesy, courage and conviction. Here, knowing the vehicle's realistic market value and assessing the condition and required repairs, you can offer an amount that both parties feel is fair and agreeable.