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Can You Buy a Car with a Credit Card?

  • Auto Refinance
  • Gerard Stevens
  • 10 minutes

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Purchasing a car requires a substantial financial investment and a hefty price tag. So when looking for a new or used car, it makes sense to compare prices. So you must check around for finance and look for the finest deal on the ideal car for your requirements. You will think of buying with a credit card if you don’t have enough money. But the important question is – can you buy a car with a credit card? 

Some dealers let you pay the entire price with a credit card. However, it’s more typical for dealers to accept a portion of it through a credit card, like a down payment. Additionally, some sellers don’t even accept credit cards. These are some things you should know about using a credit card to buy a car.  

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Can you buy a car with a credit card? 

Yes, you can! But before proceeding, you must first determine whether your dealership even offers to finance a car purchase on a credit card. Most of the time, they won’t let you put the full cost of your car on a credit card. Instead, they’ll let you pay a small down payment with it. Secondly, you must confirm that your credit card limit is sufficient to cover the car cost! 

It costs car dealers money to accept credit cards, which is one of the main reasons they discourage it. When a customer uses a credit card, the dealership must pay a transaction fee of about 3%. That fee can be costly for them to close a deal when you take c car’s ticker price into account. The dealership may charge you the processing fee if it accepts your credit card for payment.  

Here’s info on credit card rental insurance!

What factors to consider before making a down payment on your car with a credit card

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So, now you know whether you can purchase a car with a credit card. When buying a car from a dealer, you can use your credit card to pay the down payment. But you’ll probably need cash, a check from a bank or another financial institution, or an electronic transfer to buy a car from a private seller. It’s crucial to consider some significant factors when utilizing a credit card to buy a car. 

Dealers may increase the fees 

Although some auto dealers accept credit cards, they must pay the credit card processor transaction fees. Auto down payments are often in the tens of thousands of dollars, so the dealer stands to lose a lot of money in credit card costs. To pay their merchant expenses, a dealer may set a cap on the amount that can be charged to a credit card or add an extra 2%–3% premium. 

You cannot negotiate much 

The dealer might not be ready to negotiate on the car’s price if they know you’ll be using a credit card, even if they aren’t openly charging a fee. You must negotiate with them before telling the dealer you plan to pay with a credit card. By this, you’ll know the lowest price you can get through negotiating. Then you can decide whether or not you want to pay the added credit card costs on your own. 

Interest rates are higher than those on auto loans 

A customer can purchase a car using a standard auto loan by making manageable monthly payments. You can use our vehicle loan calculator to determine how different scenarios might work. In contrast, the APR on credit cards is typically substantially higher. A report from Experian for the second quarter of 2022 states that the average loan interest rate for new automobiles is around 4.33% and 8.62% for used cars. Customers must utilize a credit card for a down payment if the debt can be paid off immediately, given that average credit card interest rates range from 16%-20%. 

 

Multiple payments may result in errors and additional fees 

A car buyer can use a credit card to pay some or all of the down payment and get an auto loan to cover the remaining balance. Two monthly payments will be necessary for the car if a customer pays off the credit card balance over time. If you intend to do this, consider setting up automatic payments to ensure that you don’t forget to pay off a loan or credit card and prevent accumulating interest or late fees. 

How can you buy a car with a credit card? 

The interest rate you will have to pay is one of many things to consider before charging your new vehicle to a credit card. You should only use your credit card to purchase a car if you have a plan because they typically have lower interest rates than auto loans. Follow these steps while buying a car with a credit card! 

Check with your credit card company 

Check with your credit card issuer about approval on whether you purchase a car using a travel credit card or one with an introductory promotional APR of 0% on purchases. Also, you must notify your card issuer of the charge in advance, even if your credit limit is sufficient to cover the amount you wish to charge. If you don’t, it’s likely that a significant and unusual transaction, such as buying a car, may be suspected of fraud. 

You may need to request an increase in the credit limit if it isn’t high enough. You might get rewards for every dollar spent and a sizable sign-up bonus if you choose a new credit card for the purchase. 

Find a dealer who accepts credit cards 

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It could be challenging because many auto dealerships would rather direct you toward their auto financing choices than accept credit cards as payment. In either case, you’ll need to inquire about accepting credit card payments from the dealer you’re dealing with. You may need to choose another dealer or use another payment option if a car dealership doesn’t accept credit cards as payment. 

Consider the possible risks  

Many of the best cash-back credit cards let you collect rewards for every dollar you spend and get a 0% introductory APR on purchases for a limited period. Suppose you want to pay off your card before the introductory deal expires but fall behind. In that case, you risk paying thousands of dollars at an excessive interest rate. 

Remember that using a credit card to purchase a car may put your credit score at risk. Suppose you borrow a lot of money using a credit card. Your credit score will likely decrease because of your credit utilization, as the amount you owe with your credit limit accounts for 30% of your FICO score. The best credit card offers will be out of reach if you don’t have a FICO score of 670 or above. 

Plan to settle your balance in time 

If you’re using a new credit card with a 0% introductory APR to pay for your car, you should try to pay off your balance during that time. You should calculate the monthly payment required using a credit card calculator to see if it is feasible. Don’t let the benefits tempt you if you’re unsure that you can afford that monthly payment. Be practical about how much you can pay monthly. Otherwise, you’ll be stuck paying the variable APR (16.49%-25.24%) on any outstanding debt once the intro APR period expires. 

Is it a good idea to buy a car with a credit card? 

If you’re using your credit card to pay, there are several things to consider. 

Your credit utilization ratio 

It denotes the gap between the available credit on your card and what you owe. To minimize adverse effects on your credit score, you should keep your credit use ratio low. Potential lenders view a person who maxes out their credit card as a danger since they can be burdened with debt that they find difficult to repay. 

Zero percent intro APR 

Credit card firms often charge hefty interest rates. To make your purchase, however, get a new credit card with a 0% introductory APR. You can settle the balance before the introductory period finishes and avoid interest charges altogether. But suppose you don’t settle the balance fully before the introductory period ends. In that case, you’ll pay the card’s regular interest rate on the remaining balance. 

Rewards potential 

A huge purchase is a great way to optimize points. Using a specific card to meet high spending criteria for a big welcome bonus might make a lot of sense. Again, it can only be beneficial if you have the cash to settle the card payment immediately. If you run into high-interest charges, you can’t justify meeting the expenditure threshold for a hefty sign-up bonus. 

What are the disadvantages of buying a car with a credit card? 

Some costly factors can impact both you and the dealer.  

  • Transaction fee: The dealership must pay about 3% of this fee when using a credit card to purchase. As a result, the dealership could raise the car’s cost to pay the fee expense. Be aware of this potential fee. 
  • Convenience fee: If you do not have to pay the transaction fee, you may get charged a convenience fee for using the card. Although this cost fluctuates, it typically ranges from 2%-4% of the buying price. 
  • Compound interest: If you intend to carry a balance on your credit card, utilizing it is not a good idea. The interest on credit card debt gets compounded daily. It indicates that your unpaid balance will increase quickly. 

Calculate your auto loan payments

When should you avoid using a credit card to buy a car? 

  • If your credit card has a high-interest rate, you might think about using a bank or a dealership’s financing rather than your card. 
  • A credit card is possibly not a good idea if you want to pay off your car gradually. Since the typical interest rate is well into the double digits, you’ll pay a lot more if it takes a while to pay it off. 
  • No matter what financing you select, you should proceed with extreme caution if you have poor credit. With a typical bank, a credit card, or even dealership financing, you might not be eligible for the best prices if you have bad credit. 

What are the alternatives to using a credit card to buy a car? 

Using a credit card to buy a car may seem viable if you’re short on funds. However, it could cost you if you cannot fully settle the credit card payment as soon as you receive it. Here are a few alternatives to consider. 

Steps to consider 

  • Think about car financing: Ideally, an auto loan has a lesser interest rate than a credit card. Using an online auto calculator, you may estimate your monthly payments and the interest you could pay on a car loan. 
  • Find a co-signer: Having a co-signer with good credit could enhance your chances of qualifying and getting a reduced rate. 
  • Go for a trade-in: If you currently have a car, you can trade it in. Then utilize the trade-in value for the down payment of a new one. 
  • Use cash: You cannot buy your dream car by using cash. But a car you can afford is likely a better option than compromising your financial health by utilizing a credit card to buy a car you can’t pay for. 

can you buy a car with a credit card


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