Paying Cash vs Financing a Car: Which is Better?

paying-cash-vs-financing-car-better-1It’s time for you to get a new car or truck, and you’re weighing your financing options. It seems like such a simple decision. If you have enough money to pay cash for a new car, should you do it? While that can be a smart choice, it’s not always the right option. Here are the pros and cons of paying cash vs financing a car.

Before we get into the question of cash versus financing, a little background is in order for car shoppers who haven’t had much experience buying a new car.

If that sounds like you, here’s the deal: When it comes to buying a car or truck, you generally have two ways to go. You can either finance the car, which means you pay it off over time, or you can pay cash, which means you buy the vehicle outright as if you’re picking up a new pair of sneakers at the store and handing the clerk your debit card.

The advantage to financing is that you’ll usually end up with a better car than if you’re paying with cash. How? Here’s why.

Let’s say your car budget is $8,000. You can buy a used car if you pay in full. However, if you use that $8,000 as a down payment on a new car, you can expand your automotive horizons greatly. If you have good credit, you can easily afford many new models.

The drawback is that you’ll need to make monthly payments in order to pay off the loan that allowed you to buy the newer, more expensive vehicle. Included in those payments is interest, which is a fee you pay the bank for allowing you to borrow the money in the first place.

Cash isn’t necessarily better.

Buying a car with cash is generally preferable to financing, but there are many situations in which that’s not the case.

Most people don’t have cash to spend on a car. If you’re like many Americans, there’s never enough cash on hand to layout on a car or truck. If you have good credit, interest rates are still low and that cash might be better saved for a rainy day.

If you have bad credit, paying cash could ruin your chances to re-establish your credit. Use some of your cash for a down payment and finance the balance to show lenders you’re serious about repairing your credit.

Here are the pros and cons of paying cash vs financing a car.

Paying Cash


  • Save money because you won’t be paying finance costs.
  • Peace of mind in knowing you own your vehicle.
  • Convenience of no monthly payments.


  • Losing out on the other opportunities to leverage your cash. You may be able to earn returns on your money if you were to invest it instead of making car payments.
  • You’re missing an opportunity to build a more positive credit score.
  • If this is all the cash you have on hand, you’ll not have a “nest egg” around for emergencies.

Financing a Car (Getting a Car Loan)


  • Rates are still low for those with good credit.
  • Rates are also still lower for those with bad credit (but higher than for those with good credit).
  • Build and/or re-establish your creditworthiness.
  • Have cash available to invest elsewhere and increase income.
  • Peace of mind knowing you’ve got cash available should something unexpected happen.


  • Pay more for the car because of financing costs.
  • Time investment recommended for researching lenders and dealerships who can help with financing.
  • Paying the monthly payments.


Dye Autos has been helping customers like you with car loans for many years. We’ve got over 70 years experience in auto loan financing and we’re here to help. Call us at (303) 286-1665 or simply use our easy contact form >>here<<.