Most cars are pretty expensive, so it’s vital to decide which payment method you will use. There are many different payment options available, but what forms of payment do car dealerships accept? Fortunately, you have plenty of options in that regard.
The forms of payment car dealerships accept include checks (private and cashier’s), cash, and credit cards. However, you likely won’t be able to buy a whole car with cash or a credit card. Instead, you can use these payment methods to pay for down payments, repayments, and other services.
The rest of this article will discuss what forms of payment car dealerships accept in greater detail. It will also discuss whether a dealership or bank loan is better, so keep reading to learn more.
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Car dealers accept cash if it’s for a relatively small amount, like a down payment for a car. If you’re spending more than a few thousand dollars, it’s likely that the dealer will accept physical cash. The best way to know for sure is to contact your car dealer directly.
You certainly won’t be able to stroll into a dealership with $20,000 in physical cash to buy a car. One of the main reasons dealers won’t accept that much cash is because any transaction over $10,000 needs to be reported to the IRS. This is to combat potential money laundering, which is a pain for car dealers to deal with.
So, it should be fine to pay for a down payment in cash in some cases. In fact, this is an excellent way to cover a down payment. Since dealers have to pay fees on other payment methods like credit cards, paying in cash (for small purchases) poses less of a hassle for them.
Dealerships accept credit cards if they’re for relatively small transactions. Dealers must pay fees on every credit card transaction, meaning the bigger the purchase, the higher the fees. This reduces the dealer’s profit, which is why most of them don’t accept large credit card transactions.
Let’s say you want to buy a car upfront for $35,000. In that case, most car dealers will say you can’t use a credit card if you ask to pay with one. Sure, they will receive the money quickly, but they’ll have to pay significant fees to the bank.
Sometimes, it’s not even worth it for the dealer to accept credit cards for such large transactions because their profit decreases significantly, if they make any at all, due to the aforementioned fees.
That’s not to say dealerships don’t accept credit cards at all. Some dealerships will accept credit cards for service fees, down payments, finance repayments, and any other payment that doesn’t exceed a few hundred or thousand dollars.
It’s a good idea to pay for a down payment with a credit card because you’ll be protected if anything goes wrong later. With cash, you won’t be as protected as it doesn’t leave as much of a paper trail as other methods.
Most car dealerships accept debit cards for down payments and repayments, although you won’t be able to spend thousands with a debit card. Since the dealer has to pay bank fees, it’s not always worth it for them to accept debit cards. Additionally, most debit cards have daily spending limits.
Specifically, some banks will limit the amount you can spend in one day. If you’re unsure of your bank’s rules regarding daily spending, contact the bank’s customer service team.
Other banks may not have strict debit card limits, but you should probably double check before making a significant purchase. Although you likely won’t purchase a whole car with a debit card, you may want to use it for the down payment.
If you’re planning to spend a few thousand dollars on a down payment, let your bank know that you’re going to spend x amount of money so they don’t put your account on hold for suspicious activity. When people make large purchases they wouldn’t usually make, the bank often flags them. Then, they’ll need to explain the situation to customer service to get access to their account again, which makes the whole thing unnecessarily stressful.
Dealerships accept personal checks in most cases. If you’re paying for a car upfront, most dealerships favor a personal check over other methods. That’s because they don’t have to pay fees as they would with a credit or debit card, and they can cash the check relatively quickly.
Checks may seem old-fashioned, but they’re still an excellent way to make large purchases. The main reasons checks are favorable to car dealers are:
- The car dealer must report physical cash transactions over $10,000 to the IRS. With a check, this isn’t necessary, even though checks are as liquid as cash.
- Credit and debit card transactions come with extra fees for the dealer, so checks are cheaper to process.
Keep in mind that the above reasons only apply to purchasing a car. Paying a few hundred or thousand dollars for smaller purchases using a debit card, credit card, or cash shouldn’t be an issue in most cases.
Aside from personal checks, cashier’s checks are also a viable option for buying a car. The main difference between the two is who writes them. You write a personal check, while a bank cashier writes a cashier’s check for you.
Banks fund cashier’s checks, while your personal bank account funds a personal check. Because of this, some dealers may find cashier’s checks more attractive. These checks are usually guaranteed to not bounce since the bank has covered it.
To get a cashier’s check from your bank, you’ll likely need to pay a fee. The fees will vary depending on your bank and on the amount of money being spent. You should contact your bank for more information on check fees so you’re aware of how much you need to pay effectively.
If you can’t afford to buy a car upfront, you’re likely considering getting money from somewhere other than your personal bank account. There are different ways to go about this, but two of the most popular ones are through a bank loan and a dealership finance (i.e., the dealership directly finances your car).
In many cases, it makes more sense to buy the car on finance through the car dealer. Most dealers have good deals and won’t charge as much interest as banks. One way car dealers make profits is through finance contracts, so they may encourage you to do this.
With a bank loan, you go directly to your bank and request a loan equivalent to the value of the car. If you’re approved, you can pay the dealership what you received from the bank. You’ll then likely cover the total amount through a personal or cashier’s check. As discussed earlier, most dealers won’t accept a credit or debit card for such a significant transaction.
It’s good to cover your down payment before you decide to buy a car on finance, so your monthly repayments will be lower. Alternatively, you can pay off the car sooner with relatively higher monthly payments, though you’ll still want to put something down in the beginning.
Some dealerships may not give you a car on finance unless you put in a down payment. It’s generally a good idea to cover between 10% and 20% of the car’s total cost upfront. Better yet, pay even more than this if you can. The more money you have upfront, the better!
Once you’re ready to make the down payment, your dealer will likely accept credit and debit cards, cash, and checks.
You can choose to save money and purchase your car upfront, or you can choose a financing option and make monthly repayments. The method you choose will largely depend on your current circumstances. Generally speaking, buying a car upfront is a good idea.
Here are the primary reasons buying a car upfront is the smartest and most ideal option:
- There are no interest rates. Most car loans and financing options come with interest rates, so you end up paying more in the long run. But if you pay for the whole thing upfront, you’re paying for the car and nothing else.
- The car belongs to you. If you buy a car upfront, you don’t have to worry about the bank or dealership reclaiming the car since it’s already yours.
- The risk is low. Depending on your financial situation, buying a car on finance can be risky. You may not be able to make your repayments, often leading to repossession. This isn’t likely to happen if you buy a car upfront.
Of course, you’ll likely have to save a lot of money if you want to buy a car upfront. This can take a long time and may not always be the most viable option for you.
All dealerships accept finance options or upfront payments, so you won’t need to worry. Once you’ve decided how to finance the purchase, you can choose how you want to pay the dealership (e.g., with a check, credit card, cash, etc.).
Dealerships prefer financing over other purchasing methods because this is how they make a lot of their profits. Since you pay interest on a finance deal, the dealership receives extra income which compounds over time when you consider how many people opt for dealership financing options.
That’s why it’s cheaper to scope out dealership financing options rather than go directly to a bank. It would help if you got quotes from different places to see the best deal, which will most likely be the dealership. If you decide to finance through your car dealer, be sure to discuss the best payment methods with them and verify what your monthly repayments will be.
See also: Do Dealerships Register Cars for You?
Car dealerships accept different payment methods, including:
- Credit and debit cards
- Personal and cashier’s checks
If you’re purchasing a car upfront or making a significant purchase, you may not be able to pay the total amount in cash or with a debit card. In this instance, a personal or cashier’s check may be better.
Some other essential things to remember:
- Buying a car upfront is better than financing
- If financing, it’s generally cheapest to go through your dealership
- You can generally pay monthly repayments by card, bank transfers, and checks