By on July 19, 2016

money cash (Frankieleon/Flickr)

Want to feel a real connection to something? Pay cash for it.

Research shows the act of handing over real, honest-to-God paper money and coins for a product has a profound impact on the value a person places in that product. Suddenly, it turns into a possession.

A study published in The Journal of Consumer Research explains the weird phenomenon. Authored by Avni M. Shah (University of Toronto), Noah Eisenkraft (University of North Carolina), James R. Bettman and Tanya L. Chartrand (both Duke University), the study’s findings all relate to pain — the pain of parting with money.

“Using cash or check seems to increase the psychological ‘pain’ or sacrifice of the act and creates more affinity with the product or brand,” the authors wrote.

Cash is hands-on, while credit, debit, or payment plans spirit away your hard-earned money out of sight, and mostly out of mind. It’s the difference between taking out a target with a remotely piloted drone or strafing it low and slow with a nose-mounted 20-millimeter cannon.

Shah tested the effect while she was a doctoral student at Duke. The experiment was easy — sell discounted university mugs to faculty members for $2, with half of the buyers forced to pay with cash and the others with plastic. She then tracked down each buyer and asked to buy them back.

That cheap mug had very different resale values, depending on how the buyer paid. Staff who used a card wanted an average of $3.83 for the mug; those who paid cash $6.71. The mug had a hold on them.

It’s not hard to apply the lesson to new vehicle sales. Departing with a massive chunk of cash in one act is far different than signing a contract and having the money slowly leak out of your bank account over the course of 24, 36, 48, 60, 72 … whatever, you get the picture.

[Source: New York Times] [Image: Frankieleon/Flickr]

Get the latest TTAC e-Newsletter!

Recommended

87 Comments on “You’d Value Your Car More If You Paid Cash For It...”


  • avatar
    VoGo

    Hmmmm. Can we extrapolate on this study? It would mean that the things Americans use cash to buy – drugs, prostitution, shoe shines – are the things we hold most dear.

    • 0 avatar
      seth1065

      VoGo,
      Pretty sure you can buy all three w credit cards.

      • 0 avatar
        ellomdian

        As someone who’s worked in the Card industry, I can say this is likely untrue. I’ve seen a number of shoeshine guys who don’t take Visa yet.

    • 0 avatar
      DukeGanote

      I think more of income tax withholding. Allegedly it was instituted so you’d “feel the pain” in every paycheck. Maybe if we had to literally hand over the greenbacks there’d be a revolt?

      • 0 avatar
        jpolicke

        I’ve heard that about withholding, but I suspect it’s more about taking it from you before you spend it and not having to chase you for it when it’s due.

      • 0 avatar
        multicam

        This is what popped into my mind. Can you imagine if at the end of every month we had to write a check or enclose cash with the amount of federal taxes we pay? Or for even more of an effect- at the end of the year?

        Of course the government wouldn’t want to deal with that mess. Better to take it before it even reaches us like jpolicke said.

        • 0 avatar
          manny_c44

          @multicam If you are self employed or run a small business that is exactly what you do.

          • 0 avatar

            As someone who forks it over every month, I can assure you that most of the population would be in perpetual collections. Yes, you do notice when you earn X and pay out Y, as opposed to getting a check with a net amount.

            I only hope some of the torrent of cash I’ve wasted on the government went to buy something for the space station.

            I once asked my accountant “what would happen if I stopped paying” She said they’d be on me pretty quick because I’m in the computer. The only way you’d get away with not paying is if you weren’t already in the system….

            Oh, and all payments are now via auto-draft from your business account…the days of going to the Bank and paying there are long over. The tax website is my least favorite part of the web.

      • 0 avatar
        2manycars

        Not many remember at this point that income tax withholding was instituted as part of the “Victory Tax,” a temporary emergency measure to fund the WWII war effort. Politicians of course found it convenient to have a direct line into peoples’ pockets so the practice was continued after the war.

        Prior to the Victory Tax, income taxes did not really affect working people. (In fact part of the sales pitch for the income tax was the promise that it never would be imposed on workers, but that’s yet another story.)

  • avatar
    Zykotec

    I see no reason whatsoever to doubt that, and I’m quite sure the ‘bond’ only gets stronger if you to spend any time fixing or modifying it. Except in those rare cases where it’s a well used german premium brand and you hate every ****** minute you spend with the ***** thing…

    • 0 avatar
      bumpy ii

      Yeah, I miss all my old cars. Even the Citation, a little bit.

    • 0 avatar
      JohnTaurus_3.0_AX4N

      I’ve bought 99% of my cars with cash, maybe that’s an explanation of why I pine for similar cars, buy several of the same car, or get a huge smile on my face if I see one similar in the wild.

      I don’t miss my Concorde, Reliant, Intrepid, Cirrus, Achieva, Hombre, Sephia, B2000 Sundowner, Cavalier RS wagon V-6, Blazer, G20 (Chevy van 3/4 ton), Sentra, 99 Saturn SL, Tercel 4wd wagon, camry, or my 97 Ford Windstar.

      I paid for them all with cash, but no fond memories. The Saturn was a great commuter, but the cheap (not to mention terribly uncomfortable) interior and notorious oil usage earn it a spot here. I like other Tercels but not an 83 SR-5 4wd wagon. I’d drive a 2.4L/5-speed Plymouth Breeze, but no more V-6 cloud cars for me lol (or LH’s). The only K car I might own again would be Spirit/Acclaim/LeBaron.

  • avatar
    86er

    I’ve paid cash for my last four vehicles, and lord knows I’m attached to them.

  • avatar
    LS1Fan

    In related news, water is wet.

    Ever wondered why luxury brands (ahem, Land Rover) get away with embarrassing reliability problems ?

    They cost more. A higher price sticker often invites heavier psychological attachment , even when the product is demonstrably inferior. Note that a larger down payment for the luxury car would seem to trigger the profound attachment effect; $10,000 down hurts in a way $500 down at the Kia store doesn’t.

    I know guys who own German cars , one an Audi B7 A4 and another a BMW 530. Both cars are reliability nightmares . The BMW always drains another $1000 from its owners pocket every time I see him.

    Both of them owned reliable Japanese cars beforehand.

    Both will sooner walk on hot coals before saying ill of their cars.

    • 0 avatar
      Kyree S. Williams

      Hmm, but I think there are other forces at work:

      1) If you’re not Doug DeMuro and you don’t find it amusing every time your warrantied Range Rover leaves you stranded, you probably feel foolish when someone who spent half as much on his car experiences no issues at all. So you don’t say anything.

      2) A lot of truly-well-off luxury car buyers lease, and do so the same way that your or I might carelessly drop a few hundred bucks on a hot electronics item. The $110K S-Class means nothing to them, it doesn’t cost them what they would consider a lot of money, and so they don’t care when it breaks. But let my $30K Golf SportWagen break down. You’ll hear *all* about it.

      • 0 avatar
        meefer

        Kyree’s second point +1. The vast majority of people I know who own higher end brands (including myself) lease. During that initial ownership phase everything is covered warranty wise, the scheduled maintenance might even be covered. What’s to complain about?

        Even my out of standard warranty Lexus still had the complimentary roadside assistance. I got a tow truck and a jump in less than 40 minutes in Los Angeles. Free.

      • 0 avatar
        GeneralMalaise

        How’s that Sportwagen working for you? My son bought the 2015 diesel for his wife and they are loving it, except for all the drama in the background

    • 0 avatar
      jmo

      This may come as a shock to you but there is more to a car than reliability.

      • 0 avatar
        Kenmore

        And there’s more to some peoples’ lives than unobstructed breathing, too, but who wants to go there?

        • 0 avatar
          ToddAtlasF1

          People that don’t know a car exists to provide transportation probably have all sorts of other inadequacies they think they can address through consumerism too. I love how marketers’ hand puppets usually claim people who buy cars that work don’t know anything about cars.

        • 0 avatar
          onyxtape

          Exactly.

          A more expensive house will most likely outlast a cheaper house.

          A more expensive computer will most likely outlast a cheaper computer.

          A more expensive bicycle will most likely outlast a cheaper bicycle.

          At a basic level, a car’s premise is to transport owner from Point A to Point B. If it fails to do that, all other supplemental properties (feel, passion, drive, whatever) ceases to matter. In this day and age, the expectations are that cars are not supposed to fall apart promptly after the warranty expires – which is something even econoboxes achieve readily. There is no excuse for expensive cars to not have at least the longevity of an econobox.

          How did Mercedes and Lexus achieve their current reputations? By having stone cold reliability in their past and present heydays.

          • 0 avatar
            golden2husky

            True, but Mercedes clearly lost the scent in the 2000’s….quality and reliability were not only worse than their predecessors, they were worse than most other cars….all with a high price to repair.

    • 0 avatar
      golden2husky

      LS1Fan, I disagree about the Range Rover. Part of the cachet is the fact that it does depreciate like mad. Every rich family knows that a recurring two or three year lease on a RR means a lot of cash down the toilet. It tells everybody in the wealthy community that you, in fact, can afford it. That counts for a lot in these communities, where the wives of wealthy husbands show off how well they married and the RR is the ultimate vehicle for the “Ladies who Lunch”

      • 0 avatar
        ToddAtlasF1

        Maybe it’s regional, but in my area the ultimate 2nd wife’s car is some variety of Panamera. That being said, I do know a woman who is with an entertainer who supplied her with an Autobiography edition Range Rover. Makes for good tabloid photos. I consider them to be the ideal Range Rover owners, since professional wrestling brought them both into the public eye. A Range Rover is a way of announcing that you love money above dignity.

    • 0 avatar
      jthorner

      I once joked with a guy getting into his V-8 BMW next to my 4-cylinder Acura that maybe we should trade cars even up. He said “I don’t know you very well, but I couldn’t do that to you.” It seems he had grown tired of routine multi-thousand dollar repairs for his barely post-warranty BMW.

      Many year later I’m still driving that ’06 Acura TSX all the time, and at 148k miles rarely it has problems. Granted I had to put a new starter motor in it a few weeks ago, but that is the largest repair I’ve done to it in ten years. Cost me $150 for a brand new Remy unit made in Mexico (thanks RockAuto!) and a few hours of my time. I continue to avoid China made replacement parts when I can.

      Honda durability plus do-it-myself capabilities make me happy.

  • avatar
    Sjalabais

    I’ve paid cash for all my vehicles. That says more unflattering things about my finances and priorities than being a sparkling testimonial of my wallet though…

  • avatar
    kwong

    I’m skeptical of the findings of this research. I would assume that folks would likely value their cars more if they did the opposite payment option than they selected. I’ve always purchased my cars in cash and my first brand new car (97 Nissan Maxima SE 5-speed for $26K out the door) was monetarily valued the most. I would wash the car weekly, wax it yearly, and spent an embarrassing amount of time caring for the car. It pained me to see the value plummet by 50% four years and 60K miles later. The car drove like new, but I quickly learned that most cars depreciate quickly in their first 4 years (there are a few exceptions).

    I later purchased a 4 year old 2001 VW Golf TDI GLS 5-speed and a 4 year old 2007 Lexus Rx400h FWD, both with 80K miles on them for 60% off their sales price when purchased new. I take care to do proper maintenance for these cars, but I in no way care nearly as much about the exterior or interior for these cars as I did for the high depreciating Maxima. I bought the latter cars at such a good value (to me), that I really don’t car about door dings, minor love-taps, or spilled beverages (as long as no electrical or mechanical components are damaged).

    Had I be making payments on these cars, I would value the cars a lot more because in my mind I’d be continuously paying for a car that should be as flawless as it was when I signed the purchase agreement. Anything less than a flawless state would nag in my mind that I should be paying a lesser amount for what I’m getting in the present and future. As you can see, I don’t make many purchases with payment plans. Other than my mortgage and insurance, I can’t think of anything else I’ve chosen to commit to future payments.

    • 0 avatar
      Kyree S. Williams

      You bring up a good point: whether or not the cash car is new, used or leased:

      If I lease a 3-Series (you can do lump-sum leases, but it’s a bad idea), I may take good care of it, but I’m not going to wax it weekly. I’ll do everything I can to ensure that it looks reasonably good and that I don’t incur any damage or wear fees…and I’ll do nothing beyond that.

      Conversely, if I buy that 3-Series and plan to keep it forever (or a while), I may be that diligent in preserving its state as new. If I think or know I’m going to trade it to a dealer within five or six years, I’ll keep it as clean as possible, but not all that much. Dealers don’t pay much more for cars that don’t need reconditioning than ones that do…and they always find something wrong with the car, anyway. So why bother?

      And then, if the car is pre-owned…well, it would depend on what it is. If it’s a mint, late-model E63 AMG wagon, I’ll treat it like it was new. If it’s something more-plebeian, like a used Fusion Energi that I found on the Buick lot, it’s probably already going to have a few scratches and scuffs on it. I’ll take good care of it, but it’s an appliance; I won’t go out of my way to preserve it.

    • 0 avatar
      fvfvsix

      I’ve had the fortune to pay cash for 1 new car and 1 used car. While I do keep the paint sealed once per year and maintenance in tip top condition, I find I’m far less worried about what happens to those cars in comparison to the ones I’ve financed in the past. Also, once I’ve paid car loans off (no matter how small), there was a psychological weight lifted off my shoulder. I guess I really hate car payments.

      • 0 avatar
        Quentin

        I’m probably better off holding a car payment than paying them off early. I tend to buy less than I can afford and paying them off early means that I get the itch to buy a new bicycle or another car.

  • avatar
    Kenmore

    Mont Blanc fountain pen was one of the most disappointing things I’ve ever bought. Nib was scratchy, body was soda straw-light plastic.

    But it was a gift. For my ex. Neener

  • avatar
    SCE to AUX

    We’d also pay less in taxes if we had to write a check every time they were charged.

    Just imagine writing a $14 check every time you got 20 gallons of gas in Pennsylvania.

    Also, imagine writing checks for all of your automatic payroll deductions for Federal, state, and local taxes, and health benefits.

    Outrage would ensue, and people would suddenly re-evaluate the value of the products these monies are buying.

    • 0 avatar
      Kyree S. Williams

      That’s why I’ve long-questioned the psychology behind “doc fees.” Why tell customers that once they agree on the price of a car, they’ll pay an extra $299 or whatever, when you could just build it into the price of the car? After all, most cars have all sorts of costs to the dealer…floorplan interest, advertising, reconditioning, CPO fees (for CPO units, obviously)…but dealers don’t disclose those. They could just lump that fixed doc fee into the “costs” for the car, and then raise the floor price by $299, or whatever the doc fee is.

      It’d be less-insulting.

      • 0 avatar
        hglaber

        Because if you do that, and the dealer across town doesn’t, then they go there. And even though the price ENDS UP the same in the end when the dealer springs the doc fee on the customer, they’ll still buy it there.

        Because if you think the attachment to something is stronger when you pay cash than when you pay over time, you should see how strong it when the they (feel like they already) own something that you’re about to take away.

        It’s called loss aversion and it’s the whole basis behind the old “there’s another guy coming in after work to buy it BUT if you sign RIGHT NOW…” sales tactic, as well as the classic spot delivery “Take it for the weekend… [on Monday] Oh we couldn’t get the loan payment we talked about but we got really close! Sign here…” gambit.

        • 0 avatar
          Kyree S. Williams

          I’ve never looked at a car that was so rare I felt I needed to buy it right away. Well, maybe my Golf SportWagen, since it had come out that week and there wasn’t another SEL in a 500-mile radius, but that just turned out to be a good deal; I still wouldn’t have done it if I hadn’t been affiliated with the VW store in question and they had charged me full-price.

          Right now, I’m looking at 2011-2013 BMW 535i units. You know what? They’re a dime a dozen, even with the features I want (navigation, Comfort Access, Multi-Contour seats, hopefully M-Sport package). Sell it to somebody else. I don’t care. I’ll just go to the store halfway across town and buy theirs.

          The main way dealers get people with ownership-pressure and spot-delivery is if they are credit-challenged. They’re too apprehensive to try and apply for credit on a different car, or on their own, and not get it…especially if the car in question is much newer than what they’re stuck in. The finance manager plays up how much he “worked and worked and got this *one* lender to finance you at 21%”. And yes, dealers do use vital business connections to finance the unfinancable, but any dealership can do it. Even with bad credit, you’re not bound to XYZ Ford when ABC Ford uses the same tactics and can get you financed all the same.

          But these customers don’t want to ruin a good thing, or look a gift horse in the mouth. So they bite the bullet and overpay, because they’re just relieved they can get a new(er) car at all.

  • avatar
    mchan1

    It depends on the person!

    I’d guess that most people, Americans, don’t have the cash to pay for a new vehicle, maybe a pre-owned, but not a newer one.
    How many buyers can actually go to their bank and take out $30k-35k which is what most newer automobiles cost?

    What jobs do those people have???

    Buying new and keeping it for ~10 years is what some of us do so why not enjoy a new vehicle every decade or so? The vehicle already paid itself off, esp. if you keep up with the update.

    Buying used… that’s a whole other story. It’d pay cash as most will be more affordable, hopefully <$15k for ~5 yr old, but one never knows about any gremlins NOT reported by the previous owner!

    • 0 avatar
      JuniperBug

      Basically all my life my dad paid for his new cars in cash. The last one cost CAD $40k. When he bought his lightly-used BMW 2002 in the 70s, he took the money for it from under his mattress. He’s mostly retired now, but he was a machinist by trade and worked as a shop manager. Mom took care of the household.

      I basically serve food and drinks for a living and study part-time, and I would have the finances to buy a new car in cash, too, and it’s not because my parents gave me money or pay my expenses.

      I’m not claiming that everyone can be in a situation to have an extra $35k in the bank, but a lot of people could if they approached their finances differently.

  • avatar
    cgjeep

    My last 3 cars I’ve paid cash for and I find that it isn’t true. The cars I’ve finaced (wife’s cars) I value more but it might be because the cars I finance are a lot more expensive then the cars I pay cash for. Also I’m usually right side up in the cars I pay cash for so am not as concerned about them getting totaled in an accident. I’ll let my nephew borrow the paid for cars.

  • avatar
    energetik9

    I’ve paid cash, I’ve placed large down payments and small down payments on car purchases. It doesn’t matter to me, I have always valued my cars. I value my cars because I appreciate what they do for me and/or I have received great pleasure from them.

  • avatar
    dal20402

    My own experience isn’t consistent with these findings.

    In my lifetime, I’ve “owned” (had extended possession of) 11 cars:

    3 – bought outright
    3 – financed normally
    2 – leased
    1 – financed via Bank of Mom (at age 16)
    1 – bought below value from family
    1 – inherited

    I’ve pretty much taken care of all of them exactly the same way (careful cosmetic maintenance, the best mechanical repair I can reasonably afford). I’ve waxed and polished the two leased cars less often, and that’s about the only difference.

  • avatar
    don1967

    The evil of the 7-year car loan – even at 0% interest – cannot be overstated. It’s the surest way to keep consumers glued to the 5-year trade-a-go-round, jumping from one monthly payment to another as soon as the warranty and the shine wears off.

    That said, there’s nothing wrong with a 0% loan amortized over 3 or 4 years. The monstrous monthly payments will “bond” you to the car almost as much as paying cash, while allowing your cash to grow quietly on the sidelines.

    • 0 avatar
      Higheriq

      I for one do NOT agree with this “study”. For the cars that I paid cash, they were undoubtedly more “abused”. As for the cars purchased on monthly payments, I’ve taken much better care of them because making that monthly payment is WAY easier when the car still looks brand new (washed & waxed weekly, no dings/dents, interior vacuumed every couple of days, etc.).

  • avatar
    AJ

    I can see that. However in discussions over the last five years with the wife about buying her a new car and in fact paying cash for it, so far we keeping agreeing that we’d prefer to just leave the money in savings and not buy the car. Her current car is now 13 years old and it may very well hit 20.

  • avatar
    eggsalad

    Unless you get some sort of screaming deal on a leftover ’15 Mitsubishi Mirage, it is both ILLEGAL and IMPOSSIBLE to pay cash for a new car.

    Federal government says you can’t do transactions over $10,000 in cash.

    • 0 avatar
      dal20402

      On the contrary, you can do them all you want; you just have to report them.

      The government may (or may not) investigate why you have $25,000 in cash to pay on a car. That makes sense because most people who acquire that kind of cash do so through criminal activity. Once they find out that you are a loony bank conspiracy theorist who keeps everything in a rolled-up sock, and the cash was from your paychecks, they’ll go away… unless you haven’t paid income tax.

    • 0 avatar
      yamahog

      Then why is there a Currency Transaction Report (CTR) form for transactions that deal with over $10,000 in cash?

      It’s not illegal to pay for something with more than $10,000 cash, it’s illegal to have a transaction that doesn’t file a CTR. Even then, it’s not super illegal. Some banks looked the other way when narco terrorists dropped fat stacks off and all they had to do was pay a fine.

    • 0 avatar
      fvfvsix

      @eggsalad – what? I’ve literally never heard of that before. I’ve had a sales guy tell me he’s accepted gold coins as payment. It doesn’t get shadier looking than using Krugerrands to fund your car purchase.

    • 0 avatar
      sproc

      In general, we’re not talking actual physical currency, although dal makes it clear it can be done completely legally.

      To date, I’ve bought two brand new cars with cashier checks–no loans of any source involved–and realizing the potential cons of this, it’s quite satisfying receiving the clear title in the mail a couple of weeks later.

    • 0 avatar
      gtemnykh

      Well someone should track down the guy who bought my Civic in $11,000 worth of $100 bills. The bank teller did have to fill out a form for the Fed when I deposited the cash, it is to track potential money laundering from my understanding.

      • 0 avatar
        markf

        It was reported to the IRS, weather they had you fill out forms or not

        • 0 avatar
          CoreyDL

          This is why cash deposits are often in amounts around $9,995. No form.

          • 0 avatar
            markf

            Do to many of those and the Feds will come after you for “structuring” Many a small cash business has been destroyed by Feds going after this nonsense. Like civil asset forfeiture you must prove your innocence.

            All by products of the asinine “war on drug”

          • 0 avatar
            CoreyDL

            You’re better off using more than one bank and/or bank + credit union. Spread your deposits out as well!

          • 0 avatar
            fvfvsix

            Reminds me of a funny story. Years ago, my wife went to our bank to exchange United Way cash donations from work for a cashier’s check. She counted the money, and used some random rubber bands we happened to have laying around. A couple of them were from the Cartel Coffee Lab(google it). Needless to say, the not-very-intelligent teller suspected she was laundering drug money, while at the same time advertising that she was laundering drug money. Managers were called. Hilarity ensued.

          • 0 avatar
            CoreyDL

            LOL

            Hey, what are you, Cartel?
            Yeah, says so right on these custom rubber bands!

            When I took out (not a lot of) money to buy my old Cadillac, the teller had the nerve to ask, “So, what are you buying?”

            Had to really restrain myself from just snapping back “A t-shirt that says none of your god damn business on it.”

            I felt it was very unprofessional for him to ask.

    • 0 avatar
      jthorner

      Wrong. You can do the transaction in cash, but it must be reported to the feds.

      Also, the point of this story is that writing a personal check for the full amount is effectively the same thing.

  • avatar
    raph

    Hell I have to pay real cash money when that bank note comes due every month.

    Seems one in the same to me.

    In any event when I make a big purchase like that I always go for what I want that way if something sends me into disaster mode and I have to choose between Ruth’s Chris and Ramen that salty water and paraffin coated noodle diner will go down a helluva lot easier.

    I’ve had a few to many friends just go in for some sort of transportation when they needed it and later on regretted it to the point that they didn’t even care if it was repossessed or not.

    I’m literally that guy that would walk 10 miles a dayear or catch the bus or bum a ride rather than settle for some shit box and make payments on it.

    I’m sure somebody will come along and say I’ve never been there but the first 6 years out of the nest I did just that until I had enough credit to buy my first Mustang.

    Although admittedly I didn’t have to marry my highschool sweetheart after one beer to many and after realizing it just wasn’t meant to be and end up referring to her as “my baby’shower momma”.

  • avatar
    brn

    Yet another study that makes assumptions about cause and effect.

    Just because two things (valuing a car and how the car was paid for) have an association, doesn’t mean one caused the other. A third item may likely have caused both.

    • 0 avatar
      ToddAtlasF1

      That’s a good observation, except that the study purports to have chosen randomly to bestow different participants with different acquisition modes. I understand that those of us who pay cash for cars may be different from those who borrow for whatever reasons. The point of the study was to isolate the transaction from other factors by choosing who would get a mug for cash and who would get one on credit.

  • avatar
    John

    Have employees, and want them to value you more? Pay them cash – do it yourself, don’t delegate it. Second best is hand them their paycheck yourself. It works, trust me. Direct deposit is an arrow in the heart of employer/employee relations, I don’t care how convenient it is.

    • 0 avatar
      manny_c44

      Hmm really interesting, this might actually be true for more practical labor with high turnover rates (like construction, food industry or forestry).

    • 0 avatar
      mchan1

      Depends on the industry and your business.

      People just want to get paid. Direct deposit is best for those that actually have bank accounts so those employees don’t worry as much since they ‘know’ the money ‘will be there’ on payday.

      Cash is preferred anywhere but more acutely preferred in more (manual) labor-intensive businesses, based on my experiences, which also tend to have high employee turnover.

      Accounting for cash paid out without any employee/sublabor information is a nightmare for many businesses and their accountants, though, but that’s an entirely different hot issue.

    • 0 avatar
      jthorner

      I have a number of employees, and the vast majority prefer direct deposit because they know the money is in their bank on time. We have locations spread around, and nothing upsets an employee more than not getting paid the day they expect it.

      I still make a point of personally handing them their pay stub and thanking them for their work whenever possible.

  • avatar
    golden2husky

    I agree with the idea that paying cash helps you become attached to your car. I paid cash for my first car, a 1995 Probe GT. I still have that car today. Then again, I still have the very first car that was mine, and it was given to me.

  • avatar
    jim brewer

    Aren’t we extrapolating quite a bit from a study involving $5 coffee mugs?

  • avatar
    Carlson Fan

    “Using cash or check seems to increase the psychological ‘pain’ or sacrifice of the act and creates more affinity with the product or brand,” the authors wrote.”

    I could agree with that where actual cash is concerned but not a check. I’ve made payments on vehicles and i’ve purchased them with my checkbook. I’ve always felt more pain/sacrifice/attachment with the vehicles that had payments which is why mine were both paid off early.

  • avatar
    sportyaccordy

    I paid cash for my last car and never bonded with it, and I am financing my current car and am loving it. I think different rules apply to enthusiasts. I wasn’t enthusiastic about my last car because it was too expensive and finicky to modify to standards I would be happy with, but my current car is a blank and CHEAP canvas I’m enjoying making my own.

  • avatar
    dukeisduke

    I don’t know about that. I paid cash for my ’13 Tacoma. But it’s nice to not have a car payment, and when I had to make a hail damage claim this spring, I didn’t have to hassle with getting a lien holder to endorse the check. But I don’t treat it any differently from my ’95 F-150, which I financed for 60 months.

  • avatar
    markf

    I think there is some truth to the study. I think most folks who buy cars and consider the monthly payment as something that ill always be (the folks who keep trading in cars before they are close to paid off)value a car less then if they paid cash for it. Off course most of those folks will never allow themselves to get into a position where they could pay cash.

    I read an interesting study years ago about the psychology of purchases, specifically big vs. small. They compared buying a new car to buying a new TV. Basically folks would spend weeks and weeks driving all over to save $50 on a TV but would buy a 30K (it was 10 or so ago I read it) within an hours with no research, no comparison drive, etc. Basically the %600 for the TV was “real” money while the 30K for the ca was too large amount to be considered real….Perhaps a lot of people feel that way about dropping 45K on a car vs. financing it.

  • avatar
    vvk

    I don’t feel this way. I paid cash for my 550i and SLK350 and I really do not feel about them any different than the cars I have financed. I do feel very different about the cars I have leased… don’t care about them, mostly feel like they are temporary appliances for a specific role. I have not leased any “good” or “premium” cars, maybe I would feel different about them.

  • avatar
    Fred

    As someone who pays cash for cars it’s true I hang on to them longer than the normal lease payer. That’s because it takes a few more years before I’m comfortable writing that check again. Maybe that explains the study. I’d like to buy a new car every year or two, but can’t or won’t.

    • 0 avatar
      slance66

      I think this is part of it. We paid cash for a 2013 Volvo XC70 on Monday. Last year I bought a new Mazda CX-5, and financed some of it, after a big down payment. We have been prepaying the loan and it will be gone in another month. So we will be back to zero car payments, which is the only situation we are comfortable with.

  • avatar
    CoreyDL

    So Duke is full of students who think coffee mugs are worth $6.

    There’s a business opportunity here.

  • avatar
    Cactuar

    Dave Ramsey gets a lot of hate here, but he’s been saying exactly this for many years now. He says the Benjamins are part of the family now, and it’s hard to let go. He’s right.

  • avatar
    Higheriq

    Then again, if you can get 0% financing, that is the way to go. Using someone else’s money for free is a no-lose proposition.

  • avatar
    everybodyhatesscott

    I’d say 99% of my purchases are with a credit card but I always pay ‘cash’ for my cars and bikes. Nothing makes an 8000 dollar option look like an 8000 dollar option when you look at the change in the check you have to write vs looking at the change in the monthly payment.

  • avatar
    mchan1

    Paying cash is good IF you have the funds to do so.

    No one really wants to have an auto loan for x years but that’s the more realistic way of buying a vehicle.
    IF you have the opportunity to get a 0% auto loan, then take it. There’s no interest involved.
    Then take your time paying off the loan, even paying off early if you have funds available.

    Regardless of which method is used, it really depends on the owner.

    Just take care the vehicle especially if you keep for a long time as you’ll want it to last that long.

  • avatar
    Jeff S

    Good advice, use the 0 percent or 0.9 percent interest if you quality for it and take care of your vehicle and make it last.

  • avatar
    jthorner

    Twenty years ago my wife and I adopted the policy of not buying anything except real estate if we couldn’t pay cash or write the check for it. As a practical matter we use credit cards in our daily lives, but we have routinely paid them off in full every month for decades now.

    No wonder we are still driving 2003 and 2006 vehicles we purchased brand new and wrote checks for. It does really focus the mind :).

Read all comments

Back to TopLeave a Reply

You must be logged in to post a comment.

Recent Comments

  • dal20402: Buy: Prelude VTEC (you didn’t REALLY mean Si, did you??) Drive: 300 ZX Burn: Fox body, to save it...
  • Arthur Dailey: @Lie2me: just rip out all the pollution control equipment or sway in a different engine. I still...
  • Freddie: Remember the saying “the best is the enemy of the good”. Trying to climb out of third world...
  • Corey Lewis: Unfortunately we did Supra/300ZX/RX7 already! https://www.thetruthaboutcars. com/2018/08/buy-drive-bur...
  • theflyersfan: Can’t reply to Corey’s post… If you manage to wedge an RX-7 into that mix, heads will...

New Car Research

Get a Free Dealer Quote

Who We Are

  • Matthew Guy
  • Timothy Cain
  • Adam Tonge
  • Bozi Tatarevic
  • Chris Tonn
  • Corey Lewis
  • Mark Baruth
  • Ronnie Schreiber