Pay By Cash Or Credit? Deciding The Best Way To Save Money

After six months of a progressively louder clicking sound emitting from my engine, I decided to take my car in for a free inspection.

After only about five minutes, the auto-mechanic mentioned that he was sure my fan unit was broken and needed replacing. Great. “How much?” I asked.

His brother, the operations manager, got back to me and said, “$925 before tax, which is about $1,004 after tax.” Sales tax is 8.5% in San Francisco.

Phew! I was mentally preparing for some $3,000+ bill because the clicking sound was near the engine. When you go on the car forums, you always read about the worst situations.

The operations manager told me I’d have to come back next week because he’d have to order the entire fan unit. No problem. In the meantime, I decided to do what any rational person would do and check what fan units would cost online.

A bunch of options came up that were 30% lower than the shop’s quoted price. The next week, I gave the shop owner a ring and asked why such a huge price difference. He said the difference was between an original part from the manufacturer and a replica without a warranty.

Sensing his weakness over the phone, I asked him if there was any way we could get the price down. After stumbling through some umms and awws, he responded, “Why yes, if you pay ‘cash cash,’ not check, I’ll knock the price down to $750 out the door.

Will I still get a receipt and the warranty?” I asked.

Absolutely,” he replied.

Enticing! What would you do?


The Dilemma Of Paying Cash To Save On Cost

Pay By Cash Or Credit To Save The Most Money

Saving 25% off the original $1,000 out-the-door price is a lot.

I was already feeling relief that I didn’t have a $3,000+ bill. But to then spend under $1,000 made me feel like I was getting an absolute bargain!

At this point in my life, time is way more valuable than money. I probably could have saved a little more if I had shopped around for a cheaper auto mechanic that didn’t specialize in my automobile. But the shop’s Yelp ratings were great, and they knew what needed to be fixed.

Here were some of the things I had to consider when paying cash.

1) A lack of protection. By not being able to pay by credit card or check, there is no record that I ever paid for services rendered. I could videotape me paying them cash, but I’m sure the shop owner wouldn’t allow it. I’ve paid cash for things before that turned out not to work properly or not be authentic.

2) Might not get a valid warranty. A warranty against poor workmanship or a faulty product is something we all deserve. My immediate concern when the service manager mentioned I could pay all cash was whether that meant the service would be done off books, and therefore, no warranty. But he immediately reassured me I would get a warranty and a receipt. I still felt hesitant they would not back up their warranty.

3) Not used to carrying around a lot of cash. The most cash I carry in my wallet is $100 since I charge everything on either my business credit card or a personal credit card. Whenever I’m holding a lot of cash, I always get a little paranoid I’ll get mugged.

4) Potential aiding of tax evasion. I’m assuming the reason why I can get a 25% discount is that this small business won’t be reporting the work done to the IRS. It will be “off books.” Its profit margin will be 100% on labor and whatever markup it charges on the OEM part.

I don’t feel guilty paying cash at a favorite restaurant, so why should I feel guilty paying cash for auto service? What a business does with its customer’s cash is none of my business. Maybe the business is just trying to save on paying a credit card transaction fee. I should always assume the best of people.

5) No rewards points or sign-up bonus. Charging $1,004 to my Chase Sapphire Preferred credit card would earn me a basic 1,004 rewards points. That’s only worth up to $20. Further, I won’t get a 60,000 sign-up bonus after spending $4,000 within three months that all new Sapphire cardholders get since I’m already a cardholder. The 60,000 points are worth $750 in travel rewards if redeemed through Chase’s program.

But, I have been doing a lot of credit card research lately and I could get the following cash back bonuses or rewards with the following cards:

  • Capital One® Venture® Rewards Credit Card: 50,000 bonus miles, equal to $500 in travel rewards after spending $3,000 on purchases within the first three months. $0 annual fee first year, $95 a year after.
  • Capital One® Quicksilver® Cash Rewards Credit Card: $150 cash bonus after spending $500 on purchases within the first three months. No annual fee.
  • Capital One® Savor® Cash Rewards Credit Card: $300 cash bonus after spending $3,000 on purchases within the first three months. No annual fee, $95 a year after.
  • Chase Freedom Unlimited: $200 cash bonus after spending $500 on purchases within the first three months. No annual feel.

I could open two credit cards and charge $500 each to pay for my auto-mechanic bill and get $300 in free cash. My bill would effectively drop to $700, or $50 less than paying cash. Further, I would have purchase protection and a nice paper trail, just in case of faulty service or parts.

Alternatively, given I use Beast Master for business, I can expense the repair and automatically save 25%, whether I pay by cash or by credit card. If I pay by cash, I would just have to withdraw the cash from my business and then track the expense. If I pay by credit card, here are a couple choices as a Chase business client for the past 10 years.

  • Chase Ink Business Cash: $500 cash back after spending $3,000 within three months of opening. That’s like getting 16.7% cash back. Further, there’s no annual fee.
  • Chase Ink Business Unlimited: $500 cash back after spending $3,000 within three months of opening. Also no annual fee.

Besides not getting the lower $700 cash price, the other downside to paying with a new credit card is spending 5-10 minutes applying for each credit card and then waiting for 7-10 days to receive the cards in the mail.

But I am in no rush because the fan has already been making this clicking noise for six months. Waiting another couple weeks is no big deal since I only drive about 4,000 miles a year.

Cash Or Credit?

I’m curious to know what you’d do since the community always seems to come up with something I’m not seeing. Here is a summary of the three options:

1) Pay by cash. The easiest and quickest way to go. In this scenario, I get 25% off ($1,004 down to $750) and then get another 25% off if I write off the auto repair as a business expense. My biggest concern is that they install the fan improperly or the fan breaks within 12 months and they won’t honor the warranty, despite my receipt.

2) Pay by credit card. The conservative person would go the safe route by opening up at least a couple rewards credit cards to get purchase protection and at least $300 in free cash. The credit card sign-up bonuses would effectively make the auto repair $50 cheaper than the cash route ($700 vs. $750), while also providing peace of mind.

3) Do both. Pay by cash to get $250 off after the job is done properly. While waiting for the 1-2 hour job to get done, spend 10 minutes opening up a couple no annual fee credit cards to get at least $300 in free cash after spending $1,000 on something else. This way, I’ll get at least $550 in savings, if not much more if I keep opening up new cards after three months or so.

The sad reality is that I have to do a three-year service that’s one year overdue, a break bleeding service, and I also need to get new brake pads soon. All this will cost another ~$1,500. But of course, if I pay cash, they’ll give me a $300 discount!

Ah, the expenses never end when owning a car. At least I know that if I open up a new rewards credit card, I have something purposeful that needs charging. The last thing one should do is open up a credit card and buy something you don’t need just for the rewards.

Once I get your feedback, I’ll take Beast Master to the shop next week and let y’all know what I decided!

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