Can you buy cars with cash?

A new car is a considerable investment, but there are a variety of options at your disposal to make covering the cost easier. These include covering the cost through your employer via payroll deduction, selling your car to a dealer through a part-exchange scheme - and using a car financing plan through the dealer (the most popular option).

Alternatively, if you can afford to do so, you may choose to pay for the car upfront. By going down this route, you can secure a great deal, whilst also avoiding the additional cost of interest payments.

In this guide, we will cover whether you can buy a car with cash – and define what it means to ‘buy with cash’. We’ll also explain the pros and cons of buying with cash, the potential legal and tax implications – and the process to follow if you decide to buy a car with cash.

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What does ‘buying with cash’ mean?

Buying a car with cash means paying for the vehicle upfront, as opposed to paying in instalments or under a finance agreement. Whether you choose to pay by debit card, credit card, cheque or with physical money, you are buying the car ‘with cash’.

Can you pay for a car with physical cash?

Whether or not you are able to pay for a vehicle with physical cash is at the discretion of the dealership. While some independent dealerships may accept physical cash for smaller purchases (e.g. up to £2000), official dealerships and those selling vehicles with higher price tags will likely ask that customers pay by cheque or card.

Can I pay for a car in full using my card?

Yes – most car dealers accept card payments. This is the most common method customers use when buying a car with cash. Many dealerships prefer that customers who are paying the full cost of their vehicle upfront do so by card, as this is a simple and secure payment method.

Do dealers accept payment with cash?

Most private or independent dealers will encourage customers to pay with cash, either upfront or in a small number of instalments. This is because many private or independent dealerships do not have the infrastructure to offer traditional long-term finance agreements – and therefore, buying a car with cash is the most appropriate option.

Is it sensible to buy a car with cash?

The primary benefit of purchasing a car with cash is that once you make the payment, there's no need to worry about interest or monthly payments towards a loan. This can leave you feeling more financially secure and help you to free up some extra money each month. Additionally, it eliminates any stress around having to make regular payments on time.

With that said, car finance agreements can allow buyers who do not have the funds to pay for a car upfront to spread the cost over a series of instalments. A new car is often a significant investment and therefore, many buyers find that covering the cost with a series of smaller payments is a more manageable option.

Could it be considered suspicious to buy a car with cash?

While buying a car with cash is not considered suspicious in itself, paying with physical currency could raise alarm bells with some dealerships. This is because large cash payments are far less common than electronic payments in 2023 - and are not as convenient.

The fact that physical cash is hard to trace could feel like a red flag to some sellers, too. In short, if you can pay electronically for your vehicle, you should.

Advantages of buying a car with cash

You aren’t tied down to monthly repayments and will own the car outright.
You don’t have to pay interest, making the vehicle cheaper in the long run.
There is no approval process or credit check needed.
Not all dealers offer finance – buying a car with cash allows you to choose a car from any dealership you choose.
Some dealers may offer customers a discount for buying a car with cash.

Disadvantages of buying a car with cash

Buying a car with cash means paying the full cost upfront, which may take a while to save for.
Buying on finance may improve your credit rating, whereas buying with cash will not.
Many dealers will not accept payments in physical cash.
The large purchase could be flagged by your bank.

Cash vs. finance

Buying a car with cash means you will not have to worry about making loan payments every month or keeping up with interest rates that change over time.

You also won’t have to pay any additional loan fees or other charges associated with financing your car. Additionally, if you need to sell your car in the future, you won’t have to give any of the resale money to a lender to pay off outstanding finance.

If you are thinking about selling your car with a view to buying a new one, enter its reg number into our free car valuation tool now to find out how much it could be worth on the second-hand market.

If you are considering financing a car, use our car finance calculator to work out the potential cost of your PCP, HP, or loan repayments.

What are my other options when paying for a car?

Depending on your lender, you may be able to pay for your new vehicle using a credit card. If you are struggling to weigh up whether to purchase a car with cash or use a finance plan, this may offer the best of both worlds.

Buying with a credit card means that, whilst you are technically paying in cash for the vehicle, you are still able to spread the cost of the purchase – all whilst being the outright owner of the vehicle. Keep in mind, however, that failure to repay the cost to your credit provider may lead to the vehicle being repossessed.