Do car dealers care if you pay cash? Most used car and franchised dealers don’t care if you pay cash for a car.
Dealers will be all to happy to take payment via a debit cars in almost every situation. But lots of dealers will have limits the actual amount of physical cash they will except. This amount will vary from dealer to dealer so its important that you check in advance.
If you turn up to collect your car with $50,000 or the equivalent in pound in actual physical cash a garage may simply refuse to except it as payment. This is often due to not being able to pay large amounts of cash into a bank account easily as a business. Banks also normally charge businesses to deposit cash byway of an additional administration charge which a business may look to you to cover. So understandably they many not want to except payment in this way.
Paying in cash doesn’t always get you the best deal these days either. In the past a dealer may have taken cash as a way of avoiding paying tax, and offered a buyer a better deal for an off the books sale. But that’s a very unlikely scenario these days.
The modern car dealerships business models has also changed massively since the 1960’s and 70’s, and with the vast majority of car buyers using finance you may not get as good a deal by paying cash. The reason for this is that dealers often make commission when you take out finance and also have finance volume targets to reach. When this target is hit the dealer will normally be payed a volume bonus from a finance company. This may come in the form of either a rise in the commission rates or a deduction in stocking cost.
A large proportion of used car dealers and franchised garages use what’s called a stocking loan to help fund the cars they sell. This is the most common form of funding in the motor trade and used at every level, from the smallest second hand dealers to the largest franchised dealer groups. Stocking loans are secured by the garage against individual vehicles at the time of purchase and then repaid to the lender once the car is sold. Loans can be taken against new and used cars, motorcycles, caravans and light commercial vehicles, and a garage pays interest on theses loans. Interest rates are competitive and some leaders offer no deposit leading, allowing a garage to expand quickly and efficiently with little of no capital outlay.
But garages are still keen to reduce these overheads and are incentivised to hit a volume bonus to achieve this. The reward for hitting target often being a reduced interest rate on the loan. When you pay cash a dealer is missing out not only on the upfront commission on a sale, but also an opportunity for the deal to help hit their volume bonus. So you should take this into account whilst trying to strike a deal.
In most cases a used of franchised car dealers will be happy to take cash as payment for a car. However if you are buying a premium or luxury car the value may prohibit you from selling the balance in notes and coins regardless of the denomination. So most payments will have to be via debit card, credit card or cheque.
We have written an article covering the safest way to pay for a car here – What is the safest way to pay for a car?.
You may also find it harder to strike a good discount if you are paying cash, as the dealers have focused on buyers looking too used finance products to fund their new purchases.
You may also be better taking advantage of the historically low interest rates and negotiating and better price on your new car. Whilst putting your cash to better use that putting it into a normally depreciating asset.
1 thought on “Do car dealers care if you pay cash?”
Great insights. I do understand why a dealer would not want to accept large sums of cash. Coming up with 50,000+ in cash would DEFINITELY raise an eyebrow, heh.
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