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Paying cash for a car – What are your options?

Buying a cash with cash is not as easy as you might think

Here at The Car Expert, we spend a lot of time talking about car finance, which is how most people buy a car these days. But what if you actually have enough money to buy a car without financing it?

Paying cash for a car from a dealership is not necessarily as easy as it sounds.

Cash is king, right?

Back in the day, it was all quite simple. You went to the bank and either withdrew the required cash or got a bankers draft (known as a bank cheque in some countries), then went to the dealership and paid for your car. Drive off into the sunset, live happily ever after and so on. Nowadays, it doesn’t really work that way.

Firstly, pretty much every significant dealership in the country will try and convince you to take their car finance offer rather than paying cash. Why? Simple – they make a profit from the finance, and often more profit from selling finance than from selling the actual car.

Secondly, the world is full of schemers and crooks – and I’m not talking about the car dealers. Unfortunately, the car industry is a giant target for money laundering and other criminal behaviour. Cars are very expensive and highly mobile, so they are very attractive targets for criminal enterprise.

Laundered or counterfeit money is a real problem for the car industry, as are forged cheques and the like. Unfortunately, professional criminals are much better at making fake pound notes than you or I are at spotting them. Same goes for cheques – would you really be able to spot a fake bankers draft if you were presented with one?

Inevitably, cars were purchased using illegal or invalid funds and insurance claims started mounting up. Once that started happening, it was equally inevitable that dealers would stop taking payments by cash or cheque. Today, some dealers refuse to take any cash at all, while others have very strict limits on how much they will accept (usually less than £1,000) and very strict handling procedures for any cash they do take. HMRC also supervises dealers very closely for any money laundering activities.

So how do I pay a dealer for my new car?

Well, once you get past the pressure to take their finance, you generally have two payment options for paying cash at most dealerships:

Electronic transfer
 

Paying cash for a car via electronic transferThis is usually the preferred option. The dealer provides you with their bank details and you transfer them them money. Once the funds are safely in their account, you can collect your car.

If you have a great big bag of cash that you keep under your bed, you take it to the bank where their properly-trained staff can check to make sure the money is legitimate and then electronically transfer the funds to the dealer.

Debit or credit card

Paying cash for a car with a debit cardMost dealers will take debit card payment on the day you collect your car, while others may insist that it’s done in advance (particularly if you are picking the car up on a weekend). Some will allow you to pay with a credit card, but they will almost certainly insist that you pay the merchant fees, which can be hundreds of pounds.

You will need to check with your bank that your account actually allows you to transfer the required amount, as most accounts will have a card limit.

Cheque payment

Paying cash for a car with a chequeSome dealers will still take cheques, but regardless whether it’s a bankers draft or personal cheque, you will have to wait for the cheque to clear before taking your car. This can be up to ten business days, which is usually undesirable to both buyer and seller, so it’s generally better to use one of the other two payment methods.

A dealer will usually look at you with great suspicion if you insist on paying by cheque instead of getting the money transferred electronically.

What about paying cash for a car privately?

We have spoken previously about the dangers of taking cash when selling a car, but the same protective steps apply to you as a buyer. Are you really comfortable turning up to a complete stranger’s house with a bag of cash? If you’re buying a banger for a few hundred quid then maybe, but if you’re paying thousands then you should really have a rethink.

The best way for paying cash in a private sale is to go to the bank with the seller and withdraw the funds or draw a bankers draft. Or if you already have the cash, meet the seller at their bank so they can deposit your funds into their account. It’s public and there are loads of CCTV cameras everywhere, so you are both more secure than paying cash to a stranger at what may or may not be their house. Once the seller has your funds, they hand over the keys and papers (while you are still at the bank) and you each go your separate ways. If at all possible, take a friend with you so you are not on your own.

Summary

Very few legitimate businesses handle large amounts of cash anymore, and car dealers are no different. However, if your money is legal and legitimate, you should have no qualms about taking it to a bank and having it sent electronically to the dealership.  You are still paying cash, but in a more secure and 21st century way.

You should also read: The perils of cash and private car sales

Stuart Masson
Stuart Massonhttps://www.thecarexpert.co.uk/
Stuart is the Editorial Director of our suite of sites: The Car Expert, The Van Expert and The Truck Expert. Originally from Australia, Stuart has had a passion for cars and the automotive industry for over thirty years. He spent a decade in automotive retail, and now works tirelessly to help car buyers by providing independent and impartial advice.

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7 COMMENTS

  1. The real danger arises in the case of private sales. Bankers draft is as good as money and is much safer than carrying cash — especially when dealing with thousands. Always take a friend or family member with you, and meet at a neutral location.

    • That’s not a good idea in my opinion. Never view a car in a car park, service station or layby. You are vulnerable to bring scammed and not having any real clue as to who did it. Insist on meeting them at their house with ID (like a utility bill) and divers licence proving who they are.
      As per the article, only pay by bank transfer (take your own laptop) to the person named on the V5, drivers licence and utility bill. Take someone with you (with some mechanical knowledge) and do your own research on what to look out for with that particular car.
      If they refuse any of the above walk away, there will be another ‘perfect’ car very soon.
      And remember; if it seems to good to be true… It probably is! Walk.
      Good luck.

  2. I’m buying at a distance from a major dealer and have paid a small deposit of a few hundred pounds on credit card with the intention of paying the rest by bank transfer. I’m guessing that they’d want me to pay prior to collection (via electronic transfer), eg by a couple of days. My bank told me if I wanted peace of mind I could delay payment until the day I collect and have seen the goods close up etc. Apparently the transfer would only take a couple of hours max.
    I wonder how paying on day goes down with dealers and if it’s a practice exercised much.

    • Hi David. If you are buying the car at a distance, you can reject the vehicle for any reason up to 14 days after collection. The dealer would hate it if you tried to return the car and claim a full refund a couple of weeks after delivery, so it’s easier all round to not pay until you’ve had a chance to see the car if you are at all concerned about it. It’s absolutely your right not to pay for the car until you’ve seen it, but the dealership is also within its right not to complete all the administrative paperwork until your money is in the bank.

      Most banks use ‘Faster payments’ now, which should land in the dealer’s account within a couple of hours. You can inspect the car and then authorise payment if you’re happy. Then go enjoy a nice lunch, catch a movie or whatever before returning to pick up the car.

  3. I am buying my wife a new Aygo on a 0% Toyota Finance deal. In order to reduce my monthly payments I have agreed to pay an extra £500 as an increased deposit. I live in Essex but the purchase is with Toyota Platinum Group, Trowbridge.

    They will not accept a cheque and want me to send the money via a BACS transfer and intend to charge me £25 for the privilege!

    Is this acceptable?

    • Hi Edward. Very few places will accept cheques anymore, and have very strict limits on taking cash.

      Your bank may offer Faster Payments, which will process within a couple of hours and without the charge. Speak to the bank first.

What are your thoughts? Let us know below.

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