What Car? Q&A - Should I pay cash for my car?

Q. In the near future, I am going to be in a position to pay cash for a new car. In addition, I will not be seeking to part-exchange my current car.

Is this a sensible thing to do? I think I may be in a position to get a good deal, but some of my friends say I won't, because the salesperson won't be able to get a good commission. Should I go for a free- or low-finance deal?
David Westoby, by e-mail

A: If you have the money to hand, paying for your car with cash is usually the simplest and most cost-effective means. You'll own the car outright from the moment you hand over the readies, but you might miss out on perks such as servicing and maintenance, which can be included with a finance package.

However, if you find a 0% interest rate finance option, and your savings are in a high-interest bank account, it's possible that you could be better off buying with finance, but you'd need to consider the effects of inflation on the value of your savings.

If you can spare the cash, this is probably the best option, and you should still push the salesperson for a great deal.