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I heard that if you offer to buy a car or a flat screen TV for example with all cash, you can usually get a discount instead of using credit. Is this true and has anyone tried it?

I also heard that you can get a discount if you use a card that does not have any perks like earning points or coupons towards stores?

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up vote 3 down vote accepted

I bought a car a few years ago. The salesman had the order, I knew the car I wanted and we had a price agreed on. When I refused the payment plan/loan, his manager came over and did a hard sell. "99% of buyers take the financing" was the best he could do. I told him I was going to be part of the 1%. With rates so low, his 2 or 3% offer was higher than my own cost of money. He went so far as to say that I could just pay it off the first month. Last, instead of accepting a personal check and letting me pick up the car after it cleared, he insisted on a bank check to start the registration process. (This was an example of one dealer, illustrating the point.)

In other cases, for a TV, a big box store (e.g. Best Buy) isn't going to deal for cash, but a small privately owned "mom and pop" shop might.

The fees they are charged are pretty fixed, they don't pay a higher fee cause I get 2% cash back, vs your mastercard that might offer less.

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Thanks for the info. I asked this because I saw Dave Ramsey talk about it. – Xaisoft Sep 8 '11 at 13:30
A used car dealer or smaller stores may negotiate for cash. I don't mean to be a cynic, but often cash is a way for a business to avoid claiming the income. – JoeTaxpayer Sep 8 '11 at 13:32
I've heard alot of this cash business happens in NYC... evading even sales tax. – user606723 Sep 8 '11 at 16:59
I don't think 'cash' means literally hard currency here, but using a cheque or debit card rather than a credit card. – DJClayworth Sep 11 '11 at 2:41

Cash is very effective at getting a discount when buying from individuals (craigslist, garage sales, estate sales, flea markets, etc.). I'll make an offer, then thumb through the cash while they consider it. There eyes will dart back and forth between my eyes and the cash as they decide whether to take my offer.

Car dealers do seem to be very unique. The dealer I bought at recently said that 70% of their deals were cash purchases, JoeTaxpayer's dealer said 1% were cash purchases.

I've had good luck negotiating with cash for well-loved cars (under $10K) from both individuals or used dealers.

I'm also looking for carpet for my house and the first vendor I went to offered at 5% discount if I paid up front (no financing).

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there's a remote chance the dealer was not completely honest when he told me that. I am shocked that a car dealer may have lied to me. – JoeTaxpayer Sep 8 '11 at 17:28
@JoeTaxpayer I am Shocked, Shocked I tell you to hear a car dealer may misrepresent the truth. How long has that sort of thing been going on? – Chuck van der Linden Sep 8 '11 at 17:59

There are two fundamentally different reasons merchants will give cash discounts.

One is that they will not have to pay interchange fees on cash (or pay much lower fees on no-reward debit cards). Gas stations in my home state of NJ already universally offer different cash and credit prices. Costco will not even take Visa and MasterCard credit cards (debit only) for this reason.

The second reason, not often talked about but widely known amongst smaller merchants, is that they can fail to declare the sale (or claim a smaller portion of the sale) to the authorities in order to reduce their tax liability. Obviously the larger stores will not risk their jobs for this, but smaller owner-operated ("mom and pop") stores often will. This applies to both reduced sales tax liability and income tax liability. This used to be more limited per sale (but more widespread overall), since tax authorities would look closely for a mismatch between declared income and spending, but with an ever-larger proportion of customers paying by credit card, merchants can take a bigger chunk of their cash sales off the books without drawing too much suspicion.

Both of the above are more applicable to TVs than cars, since (1) car salesmen make substantial money from offering financing and (2) all cars must be registered with the state, so alternative records of sales abound. Also, car prices tend to be at or near the credit limit of most cards, so it is not as common to pay for them in this way.

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Excellent advice. Thanks. – Xaisoft Sep 8 '11 at 15:03
Costco takes Amex. No other card. – JoeTaxpayer Sep 8 '11 at 17:29
@JoeTaxpayer Thanks, I corrected the line about Costco. – Tal Fishman Sep 8 '11 at 17:47

Slightly off topic... Not merchandise, but I paid for various doctor's appointments with cash (as opposed to paying with health insurance). I'd call ahead of time and notify them that I'd be paying in cash. I got ridiculous discounts, sometimes even less than the copay. I do not know why this discrepancy exists and I didn't want to ask for fear of messing up a good thing.

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If you don't mind, what "ridiculous discount" did you get? – Xaisoft Sep 11 '11 at 11:53
@Xausoft. Example: shots for kids $50. Another example: I needed to go check "something" out at the doctors $65. As opposed to paying $365 because insurance does not pay until I hit the $3000 deductible. – NeedAdvice Sep 15 '11 at 19:03

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