- Can you buy a car with a credit card?
- When should you buy a car with a credit card?
- 1. You have the money to pay your bill in full
- 2. The car dealer takes credit cards
- 3. You want to grab a big sign-up bonus
- 4. You have a high-limit card in your wallet
- 5. You’ve weighed a card against other options
- Best credit cards for buying a car
- The Platinum Card® from American Express
- Chase Freedom Unlimited
- Capital One Venture Rewards Credit Card
- Ink Business Preferred® Credit Card
- What if you can’t pay with your credit card?
- 4 Benefits of Buying a Car on Finance
- 1. You can borrow 100% of the car’s purchase price
- 2. Car finance can be tax deductible
- 3. You can spend the cash on other important things
- 4. Helps you establish credit
- Overview of car finance options
- Personal loan
- Car loan
- Credit card
- Finance lease
- Hire purchase
- Chattel mortgage
- Novated Lease
- Operating Lease
- Need Car Finance? Talk To A Broker
- Can You Buy a Car with a Credit Card?
- First Things First: Will the Seller Accept a Credit Card Payment?
- Benefits of Buying a Car with a Credit Card
- Drawbacks to Purchasing a Car with a Credit Card
- How To Buy a Car With a Credit Card
- The Best Credit Cards for Buying a Car
- The Bottom Line
- Can You Buy a Car With a Credit Card?
- Can You Buy a Car with a Credit Card?
- You’re using a card with 0% interest on purchases
- You want rewards and have the cash to pay it off
- Your credit is good
- Your credit card charges a high interest rate
- You want to pay off your car slowly if possible
- You don’t have good credit
- Pros and cons of buying a car with a credit card
- Can you buy a car with a credit card?
- Are car down payments via credit card accepted?
- When should I use a credit card to buy a car?
- Should I consider using a personal loan instead?
Can you buy a car with a credit card?
A car, truck or SUV may be one of the biggest purchases you ever make, so it pays to think about how you’re going to finance that shiny new set of wheels. One way to pay: pull out your credit card.
So, can you buy a car with a credit card? Many auto dealers will let you make a down payment on a card, but it’s tougher to find one that will allow you to use a card for the entire purchase.
That was the experience of financial expert and founder of The Income Finder Paul Weaver, who bought a new Ford Explorer in May at a dealer outside Chicago. The dealer allowed him to put $3,000 of the $40,000 purchase price on his Chase Sapphire Preferred card.
That earned him 3,000 points, plus he’ll get a 25% boost when redeeming those rewards for travel through the Chase Ultimate Rewards portal on a dream Disney vacation with his wife and three-year-old daughter.
“The decision to use our card was strictly to take advantage of the points we earned,” Weaver says.
When should you buy a car with a credit card?
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Buying a car with a credit card can be a smart money move in certain scenarios, depending on factors such as your reason for using a card, the dealer policy, what rewards your card offers and your overall financial situation.
Here are five situations when it may make sense to pull out your card at the car dealership:
1. You have the money to pay your bill in full
Only put a down payment or purchase of a car on a card if you have the cash to cover the cost. Getting hit with interest on a big purchase will instantly wipe out your rewards.
Financing a car on a credit card is almost always a bad move because there are typically better and cheaper options.
One exception might be putting a car down payment on a credit card that offers a 0% introductory APR on purchases – if you have a plan to pay off the charge in the allotted time frame.
“This would not have made sense for us if we couldn’t pay the balance off in full right away,” Weaver says.
2. The car dealer takes credit cards
Many car dealerships put a dollar limit on how much you can pay with a card, and some charge a 2% to 3% fee to cover credit card processing costs.
In Weaver’s case, the dealer would have charged a 3% fee for any amount over $3,000 paid with a card. Most dealers cap the amount they’ll take on a credit card at $5,000, or at most $10,000, says Randy Henrick, auto finance consultant and president of Auto Dealer Compliance.
A luxury vehicle dealer – think Acura, Lexus or Maserati – might be more ly than a mainstream one to let you buy an entire car on a card, Henrick says.
“If it’s the difference between making a sale and not making a sale, the dealer might do it,” he says.
See related: How to buy a used car
3. You want to grab a big sign-up bonus
A vehicle down payment or purchase can allow you to easily hit the minimum spending required for a big welcome bonus. This can be especially helpful with card issuers offering huge sign-up bonuses that require very high minimum spending.
It’s not uncommon to find a welcome bonus worth $500 to $800 or more when you spend $3,000 to $5,000, says Nick Reyes, senior author at Frequent Miler, a points and miles blog.
“Even if you can only put a few thousand dollars on a credit card, it’s a great opportunity to get a significant amount of value back,” he says.
4. You have a high-limit card in your wallet
You’ll need to make sure the card you want to use has a high enough credit limit. If you’re planning to open a new card to use the vehicle purchase to meet your minimum spend for a sign-up bonus, apply early and make sure your new card has a high enough credit limit to charge your desired amount.
The average credit limit for a new card in November 2020 was just under $4,000, according to the Equifax Credit Trends report.
Need a higher limit? You may be in luck if you have more than one card with an issuer that allows cardholders to move credit limits.
“I’ve successfully done this via secure message by simply asking to move some of my credit limit from Card A to Card B,” Reyes says.
5. You’ve weighed a card against other options
It’s important to look at the pros and cons of putting all or part of a car purchase on a credit card and also assess your other choices. While there’s a “feel good” aspect to getting a big chunk of rewards and knowing you can cash them in for a dream vacation, it’s important to think through your situation.
For example, if you’d be tapping your emergency fund to pay back the credit card bill for your car purchase, it might make more sense to see if you qualify for a zero- or low-interest auto loan – aka “free money.”
The car site Edmunds.com offers a list of zero-interest car loans available now.
“Interest rates are so low right now, it’s not that big of a deal to offer 0%,” Henrick says.
See related: How to lower your credit card interest rate
Best credit cards for buying a car
Want to plan ahead and get a new card to leverage your car down payment or purchase to earn maximum rewards? Here are our picks for the best credit card for buying a car:
The Platinum Card® from American Express
Welcome bonus: 75,000 points when you use your card to make $5,000 in purchases in the first six months, and earn 10 points per $1 on eligible purchases at U.S. gas stations and U.S. supermarkets, on up to $15,000 in combined purchases, in the first six months.
Annual fee: $550
Rewards structure: Earn 5 points per $1 spent on flights booked directly with airlines or American Express Travel (starting January 1, 2021, earn 5x points on up to $500,000 on these purchases per calendar year), 5 points per $1 on prepaid hotels booked with American Express Travel, and earn 1 point per dollar on everything else
Why it’s a good credit card for buying a car: The card has a solid welcome bonus and earns Membership Rewards, points that can be transferred to a variety of airline and hotel partners to maximize redemption value.
Chase Freedom Unlimited
Welcome bonus: Earn $200 when you spend $500 on purchases in the first three months from account opening.
Annual fee: $0
Rewards structure: Earn 5% cash back on travel purchased from Chase Ultimate Rewards, 3% cash back on dining and drugstore purchases and 1.5% back on everything else.
Why it’s a good credit card for buying a car: Since car purchases don’t fall into bonus spending categories on most cards, the 1.5% earning rate for the “everything else” category gets you a half-point more than most other cards. You could put $500 of your down payment on this card to earn $200, and put the rest on another card.
Capital One Venture Rewards Credit Card
Welcome bonus: Earn 60,000 bonus miles if you spend $3,000 on the card in the 3 months after opening the account.
Annual fee: $95
Rewards structure: Earn unlimited 2 miles per dollar spent on purchases
Why it’s a good credit card for buying a car: The sign-up bonus for hitting a high spending target makes this a great card to use if you’ve convinced a dealer to let you buy an entire car on a credit card.
Ink Business Preferred® Credit Card
Welcome bonus: Earn 100,000 points when you spend $15,000 in the first three months after opening the account, worth $1,250 in travel when redeemed through the Chase Ultimate Rewards portal
Annual fee: $95
Rewards structure: Earn 3 points per dollar spent on the first $150,000 per year in combined purchases on: advertising with search engines and social sites, cable, internet, phone, shipping and travel and 1 point per dollar other purchases
Why it’s a good credit card for buying a car: If you’re a small-business owner or you have a side hustle, the big sign-up bonus and high spending requirement make this a great card for purchasing a car if the dealer will let you use your card for at least half the purchase.
If you know what kind of car you want to buy, another option is to get a co-branded automaker credit card, such as the BMW Card, BuyPower Card from GM or the Toyota Rewards Visa. These cards may allow you to earn points toward an auto purchase and give extra bonus points for dealership purchases.
What if you can’t pay with your credit card?
If your chosen car dealer balks at allowing you to pay with credit, you can do what Reyes and his wife did: use Plastiq, a service that allows you to pay for almost anything with a card.
“Essentially, you pay Plastiq with a credit card and Plastiq sends a check to your biller,” Reyes says. “They charge a credit card processing fee, but it can be worth paying that fee if you’re earning a new credit card bonus.”
The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.
4 Benefits of Buying a Car on Finance
When you’re buying a car you have two options. Either pay cash for it upfront or finance it with a loan. While car finance might be something you’ve shied away from in the past, there are some advantages of going with this option.
First let’s look at some of the pros and cons of buying a car with cash.
- There’s no weekly or monthly car payments to worry about
- You don’t have to pay interest
- Leaving your cash in the bank will earn you nominal interest given current interest rates
- You will have to save for longer (wait) the higher the purchase cost is
- You’ll have less money for other investments and unforeseen events
- You may get a higher return on your cash if you invest it elsewhere
It can be wiser to preserve you cash for other investment purposes that will appreciate in value, and buy a new (or nearly new) car on finance. New cars have fewer breakdowns and repairs, and they all come with a dealer warranty.
Now let’s look at some of the benefits of buying a car on finance.
1. You can borrow 100% of the car’s purchase price
If you need a car urgently you don’t have to wait until you’ve saved all or even part of the money. You can drive off in your new car within the time it takes the dealer to prepare your vehicle and organise the paperwork. If the monthly finance repayment is manageable, then car finance makes a lot of sense.
2. Car finance can be tax deductible
If you own a business and the business borrows money to acquire a company car then the finance costs can be tax-deductible. Check with your accountant, but according to the ATO you can claim the interest on the car loan, insurance premiums, repairs, servicing and more.
3. You can spend the cash on other important things
Spending a large, lump sum of cash upfront on a car isn’t always the best option, especially if you have a family to support or a business to run. You may need that cash for unexpected expenses, a medical bill or urgent business expenses.
4. Helps you establish credit
By making car loan payments on time you establish a finance track record and build good credit. This is very useful for the future if you need finance for other purposes, a mortgage or business loan.
Overview of car finance options
If you’ve decided that car finance is the way to go you have a few different options to consider. Here’s an overview of each to help you choose the best one for you.
Borrow a one-off lump sum and make regular set payments, including interest, to pay it back over time, normally up to 5 years. Can be secured or unsecured. Unsecured personal loans have higher interest rates. You typically have between one to seven years to pay it back.
Similar to personal loans, but the car being purchased acts as security for the loan. If you default on your loan repayments you run the risk of your car being seized. Since it’s a secured loan, interest rates can be lower.
If you can stump up some cash, it can be worth paying for the rest on credit card if you have a card with a low rate. Some lenders offer credit cards with a 0% purchase rate for up to 27 months.
The car is rented to you for an agreed period, and you pay a fixed rental amount and interest rate, as well as maintenance and repairs. Some leases include a purchase option when the lease runs out.
A deposit is paid and a monthly hire payment agreed upon. The business uses the car for a certain length of time, then ownership is transferred to you once the final payment is made.
A lender loans you the money to buy a car, and you own the vehicle from day 1. The loan is secured by the vehicle so interest rates are lower than an unsecured loan.
A car that comes as part of a salary package. Your employer deducts payments and vehicle maintenance costs from your pre-tax salary to pay the lender. Tax benefits associated with this type of finance make this an attractive form of finance for businesses with multiple vehicle requirements for their staff.
Similar to car rental. You pay for use of the vehicle only. There is no outlay of capital and no risks associated with owning it.
Need Car Finance? Talk To A Broker
Chat to Westminster today to find a car finance option that suits your needs. Our car finance brokers can arrange pre-approval so you can car shop at your leisure and avoid a higher interest rate from a dealer.
Can You Buy a Car with a Credit Card?
An often-overlooked source of auto financing may be lingering in your wallet — your credit card. Consumers use credit cards to buy cars, trucks, SUVs and other vehicles all the time. And there are some compelling reasons why doing just that might make sense in your situation.
Inversely, there are equally good reasons why you might want to think twice before you go that route.
A review of the pros and cons of using a credit card as well as the distinct advantages and disadvantages may help you decide if you want to plunk down your plastic for a new or used car purchase.
First Things First: Will the Seller Accept a Credit Card Payment?
A significant hurdle in the quest to say “charge it” at the dealership is the dealership itself. Many (or maybe even most) do not accept credit cards in the first place.
Financing is usually accomplished either electronically through the banks that the dealership works with or by the customer handing over a certified or personal check for the entire purchase price of the vehicle.
One reason for this is that credit card issuers charge as much as 4% of the total transaction amount by way of fees. That doesn't sound much if you're spending $100, but on a $30,000 transaction, it amounts to $1,200.
Dealerships are generally unwilling to take this big hit, even if it means getting rid of a car from their inventory. They may also be wary of credit transactions involving credit cards because of the liberal charge-back rights afforded to consumers under the law; if you become disgruntled with your purchase, things might get complicated for them.
Still, that's not to say that there are not dealers out there who will gladly accept your card for the full purchase price of your new or used car. If you decide to use your credit card to buy a car, be sure to call around to find out which dealers are willing to accept credit cards—this will no doubt narrow down your shopping choices and save you a bit of time in the process.
Benefits of Buying a Car with a Credit Card
There are some notable reasons that it might make sense to pay for a large item a car with your credit card, including:
- You have the cash to pay off the purchase in full. Most credit cards charge zero interest on purchases that you pay off within the grace period — usually 30 days. For the car shopper, this makes buying a big-ticket item a car a beneficial notion, since the cardholder stands to collect thousands of rewards points or airline miles from the purchase, minus any interest.
- You have a credit card that gives you cash back. Although there may be limitations on the amount of cash back you can receive if you have a card that will pay you money back for using it, then you could score big time on something you were going to buy anyway. For instance, if you have a card that pays you 1.5% cash back, and you spend $35,000 on a car, then you have just pocketed $525.
- Your credit card gives you a bonus or other incentive for spending a certain amount of money on that account. Some cards have perks for using them, including offering you several hundred dollars back for making purchases totaling $5,000 or more. Collecting airline miles has become a national pastime, and one easy way to earn them is to use a credit card for large purchases. For example, if your card gives you a standard rewards rate on every purchase, then you could quickly rack up enough miles with one fell swoop to earn one or more free tickets.
- You don't want to open a new credit line. If you're building your credit and looking to keep new credit lines to a minimum or to avoid opening a new account altogether, then you may find it easier to just put the cost of the car on your credit card. That is sometimes the case when an individual or couple looks to take out a mortgage.
- You don't want to wait for bank financing. cash purchases, credit card transactions let you get through the process of purchasing an item quickly. Pick out your car, do some paperwork, and then plop down your card.
- You don't want to worry about repossession. Credit card debt is unsecured debt. If you fall into financial trouble, no one can come out and take your car from you. With traditional financing, banks and lenders can invoke their right to repossess the vehicle if you default on your auto loan.
- You want to use a credit card just for the down payment on a car.
Drawbacks to Purchasing a Car with a Credit Card
There are also some reasons that using a credit card to pay for a car is not a good idea. Among them:
- You may pay more for the vehicle. Even if your card has a 0% APR for 24 months, if you don't pay the car off before that period ends, you may be hit with huge interests rates on your purchase, making the vehicle cost a lot more than it would have if you'd gone with bank financing instead. Credit card interest rates are typically from 14 to 28%, which can be up to three times that of a standard auto loan.
- It may hurt your credit score. Making such a big purchase on your card (especially if the cost of the car nears your available credit) messes with your credit-to-debt ratio, which is one factor that is used by credit scoring models in determining your creditworthiness. Of course, this ratio will be affected with any type of car loan, but with a credit card, it also interferes with your percentage of available credit used, which can cause a double whammy to your credit report, resulting in your score plummeting.
- The monthly payment may be more than you can afford. On a large purchase, even the minimum monthly payment on your purchase may be much more than it would be on a traditional car loan, which can make the purchase unaffordable in the long run.
- You can't pay the car off right away, and you have no other cards that can be tapped for a balance transfer before interest charges begin to incur. If this is the case, again, you'll end up paying more for the car than you would with conventional auto financing.
- You have little protection if you were to wreck your car and it is 'totaled out' by the insurance company. You may receive a check for the value of the vehicle, but this may not be enough to completely pay off the balance owed to the credit card company. If you pay for your car with a traditional bank loan, you can always purchase gap insurance to avoid this situation; purchases of gap insurance are not available for credit card balances.
- You may lose out on select automaker financing options. Manufacturers often offer great deals for well-qualified customers when it comes to financing. It is not unheard of for manufacturer financing specials to include 0% interest on a 5-year loan. Although credit card companies have many different 0% APR offers, none will ly ever run over the 60-month term that most car loans do.
Any benefits you hoped to get from your credit card issuer may be disqualified with a vehicle purchase. Consult the terms of your card agreement to see if there are exclusions that you should be aware of. For instance, even if a card doubles the manufacturer's warranty on your purchases, they may have a clause that precludes vehicle purchases from that perk.
How To Buy a Car With a Credit Card
Now that we've discussed the ins and outs of buying a car with a credit card let's delve into the 'how' of buying one using this type of financing.
Assuming you have located a dealer who's willing to take a credit card payment for a car, be sure you understand the limit on your card so that you'll know how much you can spend. Some people put the purchase price on multiple credit cards, so find out the cumulative total of available credit before shopping for your car.
Alternatively, if you plan to use a combination of your credit card, cash, and even a loan from a bank or dealer to complete the purchase, have all of those details worked out beforehand.
It is a good idea to reach out to your credit card company before attempting a large charge this one, says financial experts.
Approach the credit card company the same way you approach the dealership by asking them if you can purchase a car using your credit card. Most ly, the answer will be yes.
You can then tell them of your intent to make a significant charge to your card. They may be able to preauthorize the charge if a fraud filter tries to stop it from going through.
When possible, don't let the dealership know that you are interested in paying for your car with a credit card until after you've struck a deal. Doing so gives up some of your bargaining power since dealers must pay transaction fees or a processing fee to accept credit card payments and will ly factor that into the price that they give you for the car, right off the top.
The Best Credit Cards for Buying a Car
The card you choose to use for your car purchase is essential. You want to use the card that will give you the most useful rewards.
And that is dependent upon which rewards mean most to you — cash back from a cash back card, airline miles from a travel rewards card, or some other incentive.
You may have limited options when it comes to which card or cards will be tapped for the payment, but if you're thinking of taking out a new credit card specifically for this purchase, there are a few considerations to make.
In general, the best types of credit cards for any significant purchase should:
- Have a high credit limit, for obvious reasons. Some cards may allow you to increase your credit limit if necessary.
- Have a 0% introductory APR. Look for a card that offers an extended period that will cover the entire length of time you plan to use to pay the car off. Some cards have up to 2 years at 0% APR.
- Have no annual fee.
- Offer cash back on purchases. Read the fine print to ensure that vehicle purchases are not excluded from cash back offers.
- Give you perks. If you're going to charge it, you might as well get rewarded for it with a sign-up bonus or other benefits.
The Bottom Line
As you can see, the answer to your query about buying a used or new car with a credit card is not a firm “yes,” but more a “yes, well maybe, it depends.
” While the chances are reasonably good that you can make this type of purchase using a credit card, the question remains as to whether or not doing so is the smartest thing for you, your financial situation, the consequences of the purchase, and the ramifications on your credit.
Although you stand to potentially reap some benefit from opting for this unusual method of paying for a car, including perks airline miles, cash back, and what amounts to an interest-free loan, each situation is different, and only you can determine if bringing out the plastic when car shopping makes sense for your needs. So, while it is a good or even great option for some buyers, it is not a good choice for every buyer.
Depending on your circumstances, using your credit card for this type of significant purchase can be a valuable decision or a regrettable mistake. The ultimate decision to use a credit card to fund your car purchase should be not just the willingness of dealerships in your area to accept credit cards, but whether paying with plastic is the best route for you as a car buyer.
Can You Buy a Car With a Credit Card?
When you’re in the market for a new or used car, it’s smart to shop around. Beyond searching for the best price on the right car for your needs, however, you should also shop around for financing.
Unless you have enough cash saved up to pay for your new ride, you’ll need an auto loan or personal loan to finance the purchase. And if you’re feeling adventurous, or are having trouble qualifying for such loans, you may even weigh the pros and cons of buying a car on a credit card.
Can You Buy a Car with a Credit Card?
Simple answer, yes. However is it your best option?
First thing first: Before you can buy a car on a credit card, you have to find out if your dealership even offers that option.
Most of the time, they won’t let you charge the entire purchase price of your car – instead, they’ll allow you to put up to $5,000 of the purchase on a credit card.
Second, you need to make sure your credit card limit is high enough to cover the amount you want to charge.
So, let’s say you still think it’s a good idea, are buying a $10,000 car, and have the ability to charge up to $5,000. To cover the rest of your car’s purchase price, you’ll need to come up with the cash or apply for a loan. If you’re buying a cheaper used car, on the other hand, you may be able to charge the entire purchase price.
anything else, just because you can do something doesn’t mean you should. Here are some instances where paying for a car with a credit card makes sense – and when it doesn’t.
You’re using a card with 0% interest on purchases
With a 0% interest credit card, you could secure zero interest on your purchase for anywhere from 12 to 21 months. If you charge $5,000 on a card that falls into this category, you could feasibly pay that portion of your car loan down during that time without paying a dime in interest charges.
Before you go this route, however, you should make sure you can afford to pay off your car fairly quickly. If you don’t pay off your charged balance during your card’s 0% APR promotional period, you’ll wind up paying credit card interest when your card’s rate resets — which is going to be far higher than the rate you’d receive on a good car loan.
You want rewards and have the cash to pay it off
Let’s say you’re buying a car that’s relatively cheap to begin with and you have the cash on hand.
By paying for an inexpensive car with a rewards credit card and paying off the balance right away, you could earn valuable rewards without much effort on your part.
Since most rewards credit cards offer kickbacks worth between 1% and 5% of a purchase, you could benefit handsomely with this one small move.
Your credit is good
With good credit, you can qualify for a credit card that may make charging your car purchase worthwhile.
As mentioned above, zero-interest credit cards offer an excellent opportunity to avoid paying interest on at least part of your purchase.
If you’re in it for the rewards, on the other hand, the best travel and rewards credit cards are usually only available to individuals with a FICO score of 720 or higher.
So, if you don’t have an awesome 0% APR or rewards credit card already, don’t despair. With a little research, you can apply for a great credit card before you walk into a dealership.
What’s more, some of these cards offer huge sign-up bonuses worth hundreds of dollars to new cardholders who meet certain spending criteria — for example, making $3,000 in purchases on a new credit card within the first 90 days. Charging part of your car purchase is a surefire way to meet those requirements in one fell swoop – as long as you can pay it off.
- Related: Best Credit Card Signup Bonus Offers Right Now
Your credit card charges a high interest rate
If your credit card charges a high interest rate, you should consider dealership or bank financing instead of using your card.
Many car dealerships offer special promotions that make financing downright cheap, and you may be able to qualify for a better deal with your bank. According to an ongoing study from Bankrate.
com, the average interest rate on credit cards is over 16% as of September 2016. Surely your bank or dealership could do better than that.
You want to pay off your car slowly if possible
If you’re hoping to pay off your car at a leisurely place, a credit card probably isn’t ideal.
Since the average interest rate is well into the double digits, you’ll pay a ton more interest over time if it takes you a while to pay it off.
Most zero-interest credit cards offer 0% APR for 12 to 21 months, so these introductory offers aren’t long enough to help if you need four or five years to pay off your car.
You don’t have good credit
If you have bad credit, you should proceed with caution no matter what type of financing you choose. With bad credit, you may not qualify for the best rates with a credit card, traditional bank, or even dealership financing.
The best thing you can do is shop around for the best rate you can find and save up the largest down payment you can muster. The larger the cash deposit you can come up with, the less you’ll need to borrow and less risk you’ll present to a lender. In the meantime, you can figure out ways to start boosting your credit score over time.
- Related: Best Bad Credit Car Loans
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Pros and cons of buying a car with a credit card
Buying a car with a credit card could give you the chance to earn some extra rewards. But if you’re not careful, you may end up paying a lot more in interest on your card compared with an auto loan.
If you’re thinking of using a credit card to buy your next vehicle, here’s what you need to know.
Can you buy a car with a credit card?
It is possible to put the full cost of a car purchase on a credit card. But it primarily depends on the dealership’s policy.
Dealers, any other merchant, must pay merchant fees on credit card payments, which means they’ll end up losing 2% or 3% of what you charge.
As a result, it’s common for dealers to put a limit on how much you can pay with your credit card — typically just a few thousand dollars.
So, if you’re purchasing an older car with a low price tag, you may be able to put the full amount on your card. But you may have a harder time with newer and more expensive models.
If you’re considering using a card to purchase a car, take some time to shop around and compare credit cards through an online marketplace Credible.
CREDIT CARD CASH BACK VS. POINTS: WHICH IS BETTER?
On the surface, using a credit card to buy a car may sound a poor decision. But there are some potential advantages that can make it worth it:
- Get a 0% APR deal: Some credit cards offer a 0% intro APR promotion that gives you anywhere between six months and almost two years from the day you open your account to pay off purchases interest-free. If you have the means to pay off the full balance before the promotional period ends, you could avoid the additional cost of an auto loan. If you're interested, you can view zero percent credit cards on Credible now.
- You own the car: When you finance a vehicle with an auto lender, it technically owns the car until you pay off the balance. But if you use a credit card, you’ll get the title from the start. What’s more, you can choose how much insurance coverage you want on the car — in contrast, if you have a lender, it will ly have some minimum requirements.
That said, buying a car with a credit card may not be the best choice for many people. Here are some potential reasons to avoid it:
- Credit card APRs are higher: In most cases, the interest rate on a credit card will be much higher than that of an auto loan. If you expect to need several years to pay off the debt, you’ll save a lot of money by choosing an auto loan over a credit card.
- Repayment terms work against you: With an auto loan, your repayment schedule is set from the start, so you’ll know exactly when your balance will be zero. With a credit card, however, there is no set repayment period. Instead, you’ll just get a minimum monthly payment. If you only pay that amount, you may end up taking years longer to become debt-free.
- It could hurt your credit: Putting a large purchase on a credit card could spike your credit utilization rate—the percentage of your available credit that you’re using at a given time. The higher your utilization rate, the more it could potentially hurt your credit score. So, if you put a large purchase a vehicle on a card and take a while to pay it off, your credit score could decrease and stay down for much of that time.
HOW TO FIND THE BEST CREDIT CARD REWARDS
Are car down payments via credit card accepted?
Yes, if the dealer allows you to use a credit card, it doesn’t matter whether you’re buying the car outright or simply putting money down. In fact, because of dealer policies, it’s more ly that you’ll only be able to put money down than you are to buy the whole vehicle.
Visit Credible to view and compare credit cards from different card companies.
WHAT CREDIT CARD SHOULD YOU GET?
When should I use a credit card to buy a car?
If you have a rewards credit card and you’re in a financial position to immediately pay off your car, it could be a no-brainer to take advantage of the rewards. It may be especially worth it with a new credit card if the purchase can help you meet the minimum spending requirement for bonus points.
It may also be worth it if your credit is good enough to qualify for a 0% APR credit card, and you have the means to pay off the balance in full before the promotional period ends.
If you don’t have the budget to pay off the purchase quickly, though, you’re better off with an auto loan.
You can view and compare multiple 0% APR and rewards credit cards at once by visiting Credible.
HOW TO INCREASE YOUR CREDIT LIMIT WITHOUT HURTING YOUR SCORE
Should I consider using a personal loan instead?
On average, a two-year personal loan has a 9.34% interest rate, according to the Federal Reserve. In contrast, the average credit card charges 14.58%. But the Fed has also found that the average interest rate on a 60-month auto loan is 4.98%, which is much lower than both.
Also, personal loans tend to have shorter repayment terms than auto loans, which means a higher monthly payment. As a result, an auto loan is generally your best option for long-term financing.
That said, if you need a personal loan for other uses, visit Credible to use its personal loan calculator and find the best personal loan rates.
HOW TO INCREASE YOUR CREDIT SCORE FAST