How to Pay for a Car — Everything You Need to Know

A car is the second most expensive real asset that most people have, and one of the biggest purchases most people ever make. It’s a big decision and can have a meaningful impact on your monthly budget and financial position. So, how do you pay for a car? We’ve compiled out best tips and tricks.

To finance, or not to finance?

Many of our customers choose to pay for their car with financing even if they have cash on hand — there are a few benefits to doing so.

  • Build your credit: Financing an auto loan can build credit in a few ways. Expanding your available credit and maintaining a history of on-time payments can improve your FICO score. Auto loans are a type of “installment credit,” which means they are paid in fixed installments over a fixed time period. Many lenders view installment credit more favorably than “revolving credit,” like credit cards. You can learn more about credit score basics at Transunion.
  • Build an emergency fund: Personal financial managers generally recommend keeping enough money to cover 3-6 months of living expenses in the bank or a liquid investment account to help deal with unexpected major life disruptions, such as illness or job loss. If you don’t have an emergency fund, it may make sense to prioritize your money to start one and avoid going into debt when unplanned expenses occur.
  • Get a better return on your money: Many Shift customers get low interest rates on their auto loans, starting at 2-4% for well qualified buyers. Instead of paying for the car in cash, some choose to invest that cash to try to earn a higher return. The average term of an auto loan is 5 years. Morningstar Index Performance Return shows that the annualized returns of major stock indices over the past 5 years range from almost 9% to over 18%.Morningstar Index Performance Return
    For example, Jane Smith is deciding between paying cash or financing her $20,000 car purchase at a 3% interest rate. If she chooses to invest, such as in a low-cost index fund, she could grow that $20,000 to more than $32,000 after five years (assume 10% rate of return, where 10% is the average long term return in the stock market). She would pay less than $1,600 in total interest for the loan. That leaves her with more than $10,000 because she decided to invest instead of paying in cash. Consult your investment advisor to see what makes sense for you.
  • Protect your investment without paying everything upfront: Almost half of our financing customers choose to include a vehicle protection plan or gap coverage in their loan. These plans can be a good way to protect against the unexpected costs of owning a car, from breakdowns to accidents. They can typically be included in your financing package, so you don’t have to pay the full cost up front.

Although there are many benefits to financing your vehicle, there are also things to keep in mind.

Cars and taxes: your guide to maximize your money. 

What to consider in deciding how to pay for a car

  • Budget for interest cost: Unlike the 0% APR loans you may have seen advertised for new cars, interest rates for used cars won’t be lower than 2-4%. This means you will pay some amount of money every year in interest. Check out our car loan calculator to understand the cost of interest for your loan.
  • Be aware of hidden fees: Prepayment fees, balloon payments, or other hidden fees can catch borrowers off guard. Prepayment fees, for example, are charged by some lenders if you decide to fully pay off your loan prior to a certain date. If you finance with Shift, you don’t have to worry – Shift financing does not include hidden fees.
  • Shop around: Different lenders may offer different interest rates and terms to the same borrower, so there is a benefit to shopping around. When you apply for financing with Shift, we instantly provide you with the best offer from multiple lenders, so you get the benefit of shopping around without the hassle.

If you’re still deciding how much you can afford, we’ve built a handy car loan calculator to help you find a car that works for your budget. Even if you can afford to pay in cash, financing may make sense if you have better uses for your money, as long as you pay your monthly installments in full and on time. If you decide to finance, you can easily apply today from your Buyer Dashboard or from

Please be sure to read your loan contract for the full terms of your specific loan.

Image via Alexa Mazzarello

Tips for Buying a Used Car on Craigslist

When it works like it should, buying a used car on Craigslist can be great. But since there’s no way to ensure what you’re getting, quality on Craigslist can be hit or miss and it can feel a bit like the Barbary Coast, with mischief and gold in equal measure. Here are 9 essential tips to get you through it.

Tip # 1: Use Craigslist filters

This is our top tip for buying a used car: narrow your search. We suggest taking advantage of Craigslist’s built-in filters, which include options such as price, year, color, transmission type, type of seller (owner or dealer), and more. This will help you narrow your search to what you’re looking for and avoid wading through listings of salvaged title, three-wheeled PT Cruisers.

  • Search by dealer. For those who would prefer the peace of mind of a dealer warranty, this filter’s for you.
  • Search by price or year. If you have a budget but don’t want anything too old, easily define your price and model year limits.
  • Search by feature. Buying a car for someone with very specific tastes but only drives automatic? You can specify for color and transmission, too.
  • Search by car. If you know exactly the car you want, say a 1979 Pontiac Trans Am with the screaming chicken on the hood and Burt Reynold’s scent on the seats, Craigslist is perfect. You can plug in the exact model specification, right down to the color, transmission, and condition.

Tip #2. Research a fair price range

Before you start test driving, it’s important to how have an idea how much a car in your area should cost. There are many pricing guides out there, and while one-sized-fits-all pricing guides like KBB won’t perfectly capture the fair price for your market, it’s a good starting point.

If it’s listed way over your fair price range, you may want to skip that car. Sometimes if you wait, the seller will come to their senses and lower the price to something more reasonable.

Tip #3: Heed warning signs

This is one of the most basic tips for buying a used car on Craigslist: The listing itself can tell you a lot about the seller, as well as the car. So pay attention to these red flags:

  • Low-quality listings. Suspiciously short listings with numerous misspellings, all caps, and a general lack of details about the car smack of “keep looking.”
  • Minimal photos. A listing with one blurry, sideways photo isn’t worth your time. A huge red flag is people who post pictures that are not even of their car. Not exactly trust-building stuff is it?
  • Sloppy presentation. When we wrote our guide to selling a car on Craigslist, there’s a reason we focused so much on presentation and cleanliness. Instilling buyer confidence is step #1, and junk strewn about the interior doesn’t do that. If the seller hasn’t bothered to present the car nicely for sale, they probably haven’t been any more thoughtful owning it, either.
  • Multiple listings of the same car. If you see a car posted multiple times over a few days, it’s not a good sign.

Some good signs are clear writing, lots of pictures of a relatively clean car (including the engine), a list of recent maintenance, and just a general sense that the seller knows their stuff. We vet every car listed on Shift to make sure you have all of these things, including detailed photos, a comprehensive inspection, and a seamless interaction (not to mention an amazing car).

How to Sell a Car on Craigslist

Tip #4: Make contact

It’s a good idea to call the seller before seeing the car. Communicating via email just isn’t going to tell you as much. Don’t be afraid to ask a few questions like: why are you selling the car, how long have you owned it, what maintenance is needed and what’s been done lately? Pay attention to how the seller responds. Do they seem trustworthy, or do they give you the creeps? Are they over-eager, or do they sound like they’ve been asleep for six days?

It’s important to consider the overall vibe that they are giving you. Your time is valuable, and nothing is worse than carving out a few hours of your Saturday to go see a car, then getting a text saying the seller flaked when you’re two blocks from where you planned to meet. You can learn a lot from a quick chat on the phone. It’s worth it.

Tip #5: Be Safe

This is, we think, one of the most important tips for buying a used car on Craigslist: do it safely. That means meeting in a safe, mutually agreed upon location in an area where you can really drive the car, ideally in a well-traveled area and during a safe hour of the day. (If you meet the seller downtown, it’ll be tough to get a full sense for how the car drives, so try for something like a mall parking lot.)

As a buyer, you may be asked to go to the seller’s house. Be sure that you feel comfortable doing so, and if you do, it’s not a bad idea to bring a friend. Continue to assess the seller and make sure they are someone you trust. Ask a lot of questions and insist that you drive the car. If the seller balks, don’t be afraid to walk away.

Carfax's Carfox
Easily our favorite mascot in the car space

Tip #6: Do an inspection

We’ve covered this in another article, but a post-purchase inspection (often called the PPI) is worth paying for. Buying a car without inspecting it is like buying a house without an appraisal. A seller with nothing to hide should agree to it, so negotiate an appropriate deposit to leave with the seller while you take it to the mechanic. Bonus: What you learn can be used to help negotiate the price, which brings us to our next tip.

Tip #7: Run a Carfax report

A Carfax vehicle history report is a must-have for buying any used car. It’s easy, it can tell you a lot about the car’s history, and it can help you make sure you’re not driving off in a car with a bent frame, flood damage, and 17 owners in three years.

It’s a known Craigslist scam for a seller to kindly provide a Carfax report—from three years ago, prior to extensive post-accident bodywork. If the seller is providing their own Carfax, check the date.

If you care at all about full transparency (and with a purchase as big as a car, you should), buying with Shift not only gets you a full Carfax report for free, but also high-res wear-and-tear photos and a complete 200-point inspection report for every car we sell.

Tip #8: Don’t be afraid to negotiate

Craigslist is one of the few places where Americans can still (sometimes) haggle. Sellers often list their cars at a slightly inflated price expecting to negotiate down. That said, this isn’t a rug shop in Marrakesh, so be realistic. When negotiating, try not to be too emotional (or rude) and be able to explain your reasoning with facts.

For example, you can use information gleaned from the inspection to help support your case for a lower price. If the car needs a $300 brake job, you can see if the seller will accommodate for that in the price. Or, if the seller has the car priced well above book value (which you should research beforehand), you can see if they are willing to reflect that discrepancy with a lower price.

That said, don’t let it ruffle your feathers if they don’t want to come down on their price. It’s their car and they are not obliged to do so.

Tip #9: Take your time and trust your gut

Rushing to buy a car is the easiest way to get a healthy dose of buyer’s remorse. Throughout it all, listen to your gut. Don’t force a deal if something feels off. Buying a used car should be a methodical process, not a quick fix. When you find the right car, you’ll probably know it, and it will probably not be the first car you see.

Buying a used car on the private market can be intimidating, which is part of the reason we founded Shift in the first place. If you’re looking for a safer, more straight-forward alternative (that’s a heck of a lot of more convenient), check us out.

How to Sell Your Car on Craigslist — Part I

Looking to sell your car on Craigslist? There’s a reason it’s so popular — it attracts a large number of car shoppers and you can generally get more for your car than what a dealership will offer you. It isn’t always seamless, and can be downright dread-inducing if you don’t know what you’re doing. But is IS possible to avoid the stereotypical hassle and cash your check in fast. Here’s how.

Step 1: Decide How Much To Sell Your Car For
The price is a primary search criteria for any buyer, so you’ll want to pick a number that reflects your car’s worth but will attract reasonable buyer inquiries relatively quickly. This is one of the most critical factors to selling your car. There are many ways to go about determining it, but the quickest is to visit the Kelley Blue Book (KBB) website.

(Bear in mind: KBB doesn’t factor in your locale or compare live listings, so a second opinion might be a good idea.)

Once you have some figures in hand, consider your urgency, willingness to negotiate, and the car’s condition to arrive at your listing price.

Step 2: Wash Your Car
Every buyer is going to want to see pictures of the car, so before you do that, let’s get your ride looking as presentable as possible. This is important to do to sell your car quickly.

Basic car wash or a full exterior detailing? Generally speaking, how good your car looks will have an impact on how much you can sell it for, and you’ll often make up the cost of the detailing in the sale price. Ultimately, how you clean your car is up to you, but get it spic-n-span before moving onto step 3.

Step 3: Photograph your vehicle
This is one of the most important but overlooked steps when you go to sell your vehicle. Done well, good photos show off your car in its best possible light. They help set proper buyer expectations, and they make it easier to establish trust.

  • Exterior – Start by shooting the exterior in good daylight. Get multiple angles of the exterior and try not to get too high or too low. Hold the camera at a medium height and frame the car well.
  • Dents and flaws – It may be counterintuitive to take highly detailed photos of damage, but they’ll make sure the buyer knows exactly what they’re buying. If you avoid them, it’s only ammo for the buyer to negotiate during the test drive, so save yourself some time and hassle and capture the dents, tire wear, and paint chips.
  • Interior – Get good shots of the driver’s view and don’t forget the odometer and dash. Don’t forget the trunk area, which is often an important buyer consideration. Get some detail shots of the fabric or leather, as well as interesting interior highlights.

What’s My Car (Really) Worth? The Mushy, Inexact Science of Car Pricing

Step 4: Write an Awesome Description
Paired with your awesome photos, a good description and title is going to help your car stand out from the pack and ultimately sell your car faster. In the title, Craigslist will add the price and location automatically, so you should start your title with your car’s year, make, and model.

For the description, keep it skimmable. Use bullets and break out the basics (mileage, interior/exterior colors, engine details and horsepower) from the detailed features and options. Include a paragraph on its general condition, why you’re selling the car, how you used it, and accepted method of payment (cashier’s check is recommended). Feel free to apply your creativity here, but avoid writing too much.

Step 6: Create the Listing
Now you’re all set to introduce the world to your car. Head over to, select your geography, and click post to classifieds > for sale by owner > cars & trucks > your neighborhood to get the process started.

Insert the title and description you’ve already written, and fill in the rest of your car’s details. Select CL mail relay (which won’t make your email public) and click publish (it costs $5 dollars).

Congratulations, you did it! Let the test drives commence.

Read PART 11: Test drives & sale