Although you can buy a car using a credit card, some obstacles you may confront include your dealer’s specific policies, the size of your credit limit, and the cost of the car itself. For instance, a car is often too large a purchase to try to cover with a card.
There are some ways that you can use a credit card to help with the overall cost (such as for a down payment), but generally speaking, it’s not an easy thing to do and requires finding the right dealer, as well as some negotiating.
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Will Dealers Let You Buy a Car With a Credit Card?
Dealers will do everything in their power to sell you a car — but paying with a credit card may be a game changer. Merchants who accept credit cards pay the card issuer 1% to 3% in fees for each transaction they process. Right off the bat a dealer is losing hundreds of dollars of profit by letting you buy a car with credit.
Additionally, while credit cards are as good as money most of the time, they also offer many consumer protections. In other words, it’s possible to dispute charges made with a credit card. This makes the transaction risky for the dealer, as it can delay your payment, making the process costly and inconvenient for them. If you want to use a credit card, it doesn’t hurt to ask. When weighing the pros and cons of buying a car with a credit card, consider the dealer’s situation as well as your own.
Pros of Buying a Car With a Credit Card
If you have good credit, there can be a few perks that come with buying or putting a portion of a car purchase on your card. Some credit cards offer rewards points to customers who meet certain spending goals. Purchasing a car with a credit card is a quick way to meet those goals. These rewards typically come in the form of travel benefits or cashback when a certain amount is spent within a specific time frame.
Furthermore, when purchases are made with a credit card, they are under purchase protection, meaning that if there’s something wrong with your purchase, you can request the bank to cancel the payment. This offers you protection in case you’re sold something different than what you thought you were purchasing. Also, if you’re able to use a credit card for your auto purchase, you immediately own the car and aren’t held to the same conditions as someone with a car loan, such as mandated full coverage.
Cons of Buying a Car With a Credit Card
There can be some pretty serious consequences to putting the cost of a car on your credit card balance. For one, interest levels on credit cards tend to be higher than other loans. In other words, there’s a good chance you’ll pay more in interest than you would have on a car loan, which usually comes with lower interest rates due to the size of the purchase.
Secondly, you risk maxing out your credit limit. Even if you don’t max out your credit limit, your utilization ratio can still spike, hurting your credit score. Many experts think that using your credit card properly involves carrying a balance that’s less than 30 percent of your credit limit. If your credit limit is around $20,000 and you’re buying a $10,000 car, you may want to rethink your purchase.
Depending on your credit and the dealership, paying with a credit card may actually cause you to miss out on special financing deals or promotions that come with taking out an auto loan. Additionally, if points or rewards are your angle in buying a car with a credit card, there is a chance your bank may limit the points and rewards you can receive within a time period.
How to Buy a Car With a Credit Card
If these pros outweigh the cons and you’re still interested in trying to purchase a car on your credit card, there are a few steps to getting started. First, make sure to research your credit card agreement. This includes knowing your credit limit, restrictions on points or rewards, and transaction limits, among other factors.
Second, find a dealer who will accept your credit card. Once you find that dealer, make sure you ask questions and be willing to negotiate. If the seller will only let you charge part of the transaction, consider it. There’s a chance that will be the best deal you’ll get. As you go through the steps of buying a car remember to research car loans and other payment options to determine whether paying with a credit card is the best option available to you.
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