Do you believe that cash is more powerful than a credit card? If you walk into a store with a wad of $100 bills, do you believe that you’ll get a better deal than you would if you flashed your Visa? I used to think so, but after trying the “flash your cash” method a couple of times, I’m starting to think that cash is no longer king…
Why Don’t They Want Your Cash?
The Car Dealership
The first time I tried to get a deal with cash was when we purchased our Jeep. We planned on getting a cashiers check from the bank, but we were going to look at a couple of vehicles that day and didn’t know which one we were going to buy. So, we went to the bank in the morning and withdrew $6,400 in cash – all $100 bills. I think it was the most money that my wife and I had ever held; boy did we feel POWERFUL!
When we rolled into the dealership, we let them know that we were interested in the Jeep and that we brought cash. We thought that the sales staff would treat us like royalty and give us the best deal they could, but it didn’t quite happen that way. I think they were more concerned that someone within earshot was going to jump us from the other side of the lobby!
He soon explained that cash was nice, but they were really only interested in a cash purchase if they were low on cash flow. Car loans and leases paid much better in the long run than cash. If I remember the stat correctly, when a dealership sells a car for cash, they only make about $80 on the deal. If they sell the car on payments, they make more like $600. And, if they lease the car, they make well over $1,000 per vehicle. So clearly, dealerships aren’t all that interested in your cash.
Appliances at Lowes
The next place we tried to flash our cash was at Lowes. Since we recently bought a foreclosure, we were in need of appliances (the previous owners stripped the place of pretty much everything except for the copper wire in the walls). Off to Lowes we went to check out their selection.
I figured we could get a great deal on appliances for two reasons. 1) We were going to buy 4 pieces (bulk discount), and 2) we were going to pay cash for them. Apparently I was wrong on both accounts.
Since there was already a 10% sale on the appliances there was no bulk discount offered, and when I asked the salesman about paying with cash, he told me that they really didn’t offer further discounts for that. As he explained it, ‘paying with cash only requires more man hours for counting, sorting, and handling. We can actually make more with the credit purchase – even after the 2-3% credit charge from Visa.’ I was a little astonished! Was cash no longer king?!?!
Why You Should Still Use Cash
First of all, I am not urging you to go out an purchase everything on credit. I still think that it’s incredibly wise to only use your debit or use your cash – it might not give you any more of a discount, but at least you know that your bill is taken care of and you aren’t shocked by a $2,000 credit card bill next month.
That’s not the only reason to use cash however. You can still save some money by whipping out the Benjamins in the situations below!
- Private Party Sale – when you’re purchasing an item from a private party (this could be anything…furniture, cars, appliances), cash is powerful. The seller loves cash more than anything, and they’ll certainly be willing to lower the price when the see it. Sometimes, it’s just an emotional thing.
- Small Mom-and-Pop Operations – with these small stores, cash flow can often be an issue. If you show them cash instead of a credit card, they might be willing to drop the price for you.
- The mechanic – For whatever reason, my mechanic preferred a personal check over a credit card. So much so, actually, that he gave a 10% discount off from the bill if you paid with a check. So, this could definitely be an option for you as well!
- Large Purchases – when you’re purchasing something of great value, like property or a business. Paying with cash is always enticing. I once heard a story about a man that would locate all of the properties that were nearing foreclosure, and then would walk up to their door with a briefcase of cash totaling $50,000. More often than not, the people jumped on the opportunity to get their hands on that cash, even though their homes were worth nearly $80,000. If you have a lot of cash, you can certainly get a discount.
Do you still think that cash is king? Were you ever able to get a discount because you paid with cash?
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.