 TITLE: Do You Need Credit to Buy a Car With Cash? CONTENT: Benefits of Paying for a Car With Cash\n--------------------------------------\nIs cash the best way to pay for a car? Providing you can afford it, paying cash can save you both money and stress. Among the many benefits of paying outright for your car:\n*   **Discipline**: You can't spend beyond your budget if you're limited by the amount of money you have on hand.\n*   **No interest**: According to Kelley Blue Book, the average cost of a new vehicle was $38,723 in September 2020. Financing that entire cost over five years at a low 3% rate racks up more than $3,000 in interest.\n*   **No monthly payments**: You'll still be on the hook for gas, insurance and registration, however.\n*   **You won't be upside down on your car's value**: When you finance a car, your payments are structured to repay interest first, then principal. So, in the early months of owning a new car you may owe more on your loan than the car is worth—especially since a new car begins to depreciate as soon as it's driven off the lot. When you pay cash, you always own the full value of your car.\nThat's the good news. There are also instances when paying cash might not be the best choice for financing a car:\n*   **You want to maintain your savings.** Using all of your available savings to buy a car probably isn't the best strategy. If you don't have ample cash set aside to buy a car—and maintain an adequate emergency fund—you may want to reassess.\n*   **The dealer offers you 0% financing.** A 0% APR car loan would let you pay off only the cost of the vehicle (plus taxes and fees you'd pay anyway) over a period of several years. This would potentially save you thousands in interest and keep you from making a big lump-sum payment, though you'll still need to pay a down payment. If you're so inclined, you could take what you would have spent on a car, invest it, and theoretically earn income on your cash over the period of your loan. If you get a 0% APR loan and make money on your investments, you'll come out ahead. Of course, you could also lose money by investing your cash: Only you can gauge whether the reward is likely to outweigh that risk.\n*   **You can always split the difference.** Suppose you put 50% of the car's cost down and finance the other half. You could have a small monthly payment or a shorter loan term. And you could preserve half of your cash for emergency savings, retirement, investments or even subsidizing your car payments. END