Can I Buy a Car With a Credit Card?
Yes and no. Using a credit card to buy a car may seem like an intriguing idea, but there are a few reasons it’s not commonly done. Depending on the cost, 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, 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 can be a game changer. Merchants who accept credit cards pay the card issuer 1 to 3 percent in fees for each transaction they process. That means right off the bat a dealer is losing hundreds of dollars of profit letting you buy a car using credit.
Additionally, while credit cards are as good as money most of the time, they also offer many consumer protections, which means it’s possible to dispute charges made with it. This makes the transaction risky for the dealer, as it can delay your payment, which can end up being costly and inconvenient for them. If you want to use a credit card, it doesn’t hurt to ask, but it helps to understand the situation on their end.
Pros of Buying a Car With a Credit Card
If you have good credit, there can be a few perks that come with potentially buying or putting a portion of the purchase on your card. Some credit cards offer reward points to customers who meet certain spending goals; goals which could quickly be met with an auto purchase. These rewards typically come in the form of travel benefits or cash back 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, which means if there’s something wrong with your purchase, you can request for 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 are usually pretty high — anywhere between 13 and 23 percent — which means there’s a good chance you’ll pay more in interest than you would have on a car loan, which are usually in the lower end of that range due to the size of the purchase.
Secondly, you risk maxing out your credit limit. Even if you don’t, depending on how much the car is and how much space you have open on your card, your utilization ratio will likely spike, which may hurt your credit score. Many experts think that it’s best to carry a balance that’s less than 30 percent of your credit limit, so unless your credit limit is around $20,000 and you’re only buying a $5,000 car, you might be making a credit card mistake.
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 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 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 make the purchase, there are a few steps to getting started. For starters, make sure to research your credit card agreement: know your credit limit, restrictions on points/rewards, transaction limits, etc.
Secondly, find a dealer who will accept your credit card, and when you find one, 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, research car loans and other payment options to make sure paying with a credit card is the best option for you.
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This post was updated February 28, 2019. It was originally published February 6, 2018.