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Why do they make you fill out a credit application even if you're paying cash for your new car?

Dealerships want you to finance your new car, not pay cash. That's because they often make more money from the financing of the vehicle than from the sale of the vehicle itself. So when you are buying your car, they'll probably ask you to fill out a credit application even if you tell them you'll be paying with cash. The Sales Manager will then use the info on your credit application to obtain your credit report to find out if you are eligible for financing. If you are, they may then try to convert you to financing. They may show you how the financing figures "make more sense" than paying cash. They may even try to make you feel stupid for buying a car with cash.

Here are three strategies for buying a new car with cash:

1. THE TRICKY STRATEGY: When you're negotiating the price of your car, lead the dealership to believe you will finance the vehicle with them. They may then give you a lower selling price thinking they'll make it up with the financing. Then, when you're in the Business Office, "change your mind" and tell them you decided to pay with cash instead.

2. THE HONEST STRATEGY: Tell them up front that you will be paying cash. In this case, the negotiated selling price may be a bit higher than if you were to finance the car.

3. THE SMART STRATEGY: Get free price quotes online. The quoted prices you receive will be the same regardless if you are financing or paying cash. Choose the lowest price offered, then go to that dealership and buy the vehicle at the quoted price. It should be an easy and stress-free buying experience.

In any of these cases, if they give you a hard time about paying cash, just threaten to leave and go to another dealership. Threatening to leave the dealership is always your best tactic.


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