Do Not Tell the Car Deal You Are Paying in Cash

Most folks can’t, or don’t want to, pay cash for their next car. I advise against paying cash in today’s economic climate because borrowing costs are at historic lows and expected to stay there for a long time. The stock market is climbing to record highs. You can borrow the money from your bank or credit union to finance the car at a lower interest rate than your rate of return on conservative investments.

With that said, there are folks who simply don’t like to borrow money, “Neither a borrow nor lender be”. They’re typically my generation, baby boomers. My parents taught me to save my money until I could afford to pay cash…that’s just the way it was back then. Then, I could often get a “cash discount’ because the seller got all his money up front and didn’t have to wait or worry about getting “stiffed” by the buyer, because he couldn’t or wouldn’t pay. That’s no longer the case. Sellers aren’t lenders anymore, but there are lots and lots of lenders anxious to loan the money. The sellers get all their money upfront, via the third-party lenders, including car dealers.

This morning I noticed a posting on my Facebook page, This was the post by Elizabetha, “I WAS TOLD BY SEVERAL SALESMEN TODAY THERE ARE NO INCENTIVES IF YOU PAY FOR A CAR WITH CASH. DOES THIS MAKE SENSE TO YOU? One of my Facebook friends asked me to give Elizabetha my opinion and here’s what I posted:

Earl Stewart Elizabetha, car dealerships, not only won’t give you a discount for cash, they’ll likely charge you MORE. Dealers make a lot higher profit FINANCING the cars they sell than from the actual sale. If they know you’re paying cash, they’ll try harder to make more profit on the sale.

AutoNation, the largest auto retailer in the USA, makes over $2,000 per car in their finance department…more than TWICE their net profit on a car.


You would know Earl Stewart Toyota.

Earl Stewart

Elizabetha, yes, I’m personally experiencing this in my dealership. Competition is fierce on car pricing and if you use this to your advantage, you can buy a new or used car at a lower price than ever before. Even if you do pay cash, DON’T tell that to the dealer until you’ve bought. Let him think he can “make up” for the low price you negotiated by financing and selling you GAP insurance, extended warranties, and maintenance plans. If you want to finance, use your bank or credit union.


Earl Stewart, why is you own Bank cheaper interest?

Earl Stewart

Elizabetha, the banks dealers finance our car through allow the car dealer to “mark up the interest rate”. For example, the dealer will borrow the money from the bank at 2.5 % and finance your car at 4.5%. The bank then “kicks back” the extra 2% to the dealer. This profit to the dealer can be several thousand dollars. If you borrow directly from your bank or credit union, not the marked-up dealer rate. In Florida, the legal interest rate a car dealer can charge you on a new car is 14.5%.

Earl Stewart is the owner and general manager of Earl Stewart Toyota in North Palm Beach. The dealership is located at 1215 N. Federal Highway in Lake Park. Contact him at, call 561-358-1474, fax 561-658-0746 or email

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