When you are ready to purchase a car, you need to decide if you want to purchase the car with cash or if you want to finance the purchase of the vehicle. If you want to purchase a vehicle in cash, there are some advantages of going through with this approach.

Advantage #1: Save Money

Paying with cash will save you money on the total purchase price of the vehicle. However, when you take out a loan, you will not get that cash for free. You will have to pay interest on that loan, which will increase the total purchase price of the vehicle. When you pay with cash, you will only have to pay the purchase price; you will not have to pay interest to purchase the vehicle.

Advantage #2: No Monthly Payments

When you pay for your vehicle in cash, you are paying for the vehicle in full up front. That means you will not have to budget for and worry about making monthly payments on time for the next three to five years. You will reduce your monthly financial burden, as you will not have to balance a car payment with your other expenses.

Advantage #3: Insurance Freedom

When you finance the purchase of a vehicle, your lender may require you to carry a certain level and type of coverage, such as collision and comprehensive coverage, and they may even determine your deductible. They may also require you to carry gap insurance.

When you purchase a vehicle with cash, there is no lender who is dictating what insurance you need to carry and thus your insurance costs. You will be able to choose exactly what insurance you want and need.

Advantage #4: Smart Purchasing Decision

Finally, when you purchase a car with cash, you are making a significant investment. You will want to be very sure about what you are doing when you purchase a vehicle with cash. You are the full owner of the vehicle. You will want to research how well the vehicle holds its value and ensure the vehicle you choose will retain its value over a long period. You will make an intelligent decision when you know you are fully investing your money into a vehicle.

If you decide to purchase a car with cash, it is a good idea to keep that information to yourself when you are negotiating the price of the car. Negotiate the cost of the car first and get the dealership to agree to a price in writing.

Then, when you start to discuss financing, you can bring up the fact that you are paying cash. However, you shouldn't pay with physical cash — instead, you should set up an ACH transfer from your bank or pay with a money order or other form of traceable payment.

Contact a local car dealership to learn more about purchasing a car.