Paying cash for a used car doesn't necessarily mean you have to slap a wad of cash on the dealer's table. Instead, it simply means you're paying the total cost up-front, by cash, check or credit card. The process is similar to buying a car with a loan, but requires fewer steps to completion.
Before you do anything else, you'll need to find out what the car is worth, have a mechanic check it for potential problems and then negotiate a price based on your findings. When you pay cash, you're less of a risk to the dealership, which might mean you can negotiate a slightly lower price. However, financing helps the dealership make additional money off of your purchase, which means some dealers are more likely to negotiate with people using financing. Consequently, you may want to talk to several dealerships to see who offers the best deal, then use your offer from each dealership as leverage for other offers.
If you're working with a private seller instead of a used car lot, the purchase process is the same. However, because private sellers don't typically offer financing, you might not be able to use the fact that you're paying in cash to get a good deal or to use offers from other dealerships as leverage. You'll also need to ensure you follow the proper purchase process, since the seller might not be familiar with it. You'll need a purchase agreement or contract, as well as a copy of the title transferring ownership to you. Some states require proof the vehicle has passed a smog check.
Getting the Money
Carrying a giant wad of cash around can be a dangerous undertaking, and some banks place limits on how much you can withdraw each day. Consequently, it's easier to get a certified or cashier's check from your bank. This serves as verification that you have enough funds to pay for the purchase, and automatically deducts the money from your account. Ensure the check is made out to the legal name of the dealership, which may be different from the name under which it does business.
Signing the Contract
Carefully read through the terms of the contract and ask questions about anything you don't understand. If you negotiated a warranty or other perks, ensure they're clearly listed in your contract. Otherwise, you won't be entitled to these benefits. When you're comfortable with the contract, make a copy, sign it and return it to the dealer. For private sellers, a bill of sale is usually sufficient.
Paying and Taking Ownership
Some states allow your insurance to automatically transfer to your new car for a brief period of time, but others require that you immediately purchase insurance. Check your state laws to ensure that the car is properly insured before you drive it off the lot. The dealer will need to give you the car title, the temporary tag and a copy of your contract. For a private seller, you'll receive the title and a bill of sale. After you pay and sign the contract or the seller signs the bill of sale, you can take ownership of the car.
Van Thompson is an attorney and writer. A former martial arts instructor, he holds bachelor's degrees in music and computer science from Westchester University, and a juris doctor from Georgia State University. He is the recipient of numerous writing awards, including a 2009 CALI Legal Writing Award.