The question isn't "Do I need a DAC?", of course you don't NEED a DAC or most other stuff for that matter. The question is "Do I want a DAC?". Only you can answer that question.
I think you should get a Schidt Bitfrost from Audio Advisor and audition it for 30 days. You can return it for free, and it's a very good DAC at the $400 level.
Not sure about weakest links theories, but in my experience after speakers, upgrading the DAC has consistently been the highest return investment in audio. DAC + volume Control are the new digital premps.
Only problem with investing in DACs is technology is moving fast and price performance is coming down very quickly, so you always worry about spending too much money on a DAC when something better or something similar for half the price is just around the cornet. got to just commit and enjoy the music at some point though.
If you put in a CD and music comes out, then you don't "need" a DAC.
The proper question would be "will an external DAC improve the quality of sound that I hear from my system?".
And the answer should be "maybe" or "probably", but the only way to know for sure would be to A/B one in your system and see what your ears tell you.
There are lots of exceptionally good sub-$500 DAC's from Schiit, Music Hall, Cambridge Audio and many others on the market right now, so I'd suggest giving one a shot.
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