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Ever think about using a credit card to buy a car? You might now

Here's how you can use a credit card to buy a car — and what other financing options you have.

When looking to finance a new car, you’ve got a few different options. These can include — and are not limited to — paying in cash, taking out a personal loan, a car loan or a lease agreement. There’s also the option to use a credit card, although there are a few ways this should be done to minimize interest.

With low interest rate promotions on the market, a credit card may be the ideal option for paying off your new car. Credit cards carry risks however, so it’s important that you take the time to figure out if a credit card is really the most suitable option for financing your new car.

How to buy a car with a credit card

The main ways to pay for a car purchase is to use:

Choosing a low interest rate card means you can pay off the balance gradually without facing the hefty charges associated with a regular credit card or a personal loan.

You can also choose to transfer the balance over to a loan or transfer it to a new a card with a low or 0% balance transfer offer. You could theoretically continue to balance transfer the remaining balance to a new card each time the promotional balance transfer period ends, but there are a few drawbacks to this method. When you transfer a balance over to a new card, you’ll only be able to transfer a certain percentage of your total approved limit. This is usually around 70% of your approved credit limit – plus you might eventually run out of providers who are willing to give you a balance transfer card.

Did you know?

Every time you apply for a new credit card, your potential card provider will check your credit file. These checks, also known as “hard pulls” or “credit inquiries”, are also recorded on your credit file. Too many credit inquiries at any one time may be a red flag to lenders – not to mention your credit score can decrease, since a single credit inquiry knocks around 5 points off your score.

Other things to consider when buying a car with a credit card

  • Annual fee. Some credit cards come with an annual fee, so you’ll have to factor this into your equations when working out how much this method of buying a car will cost you.
  • Interest rates. If you can’t make a car payment in full, you’ll want to be wary of the interest rate your credit card charges. This is one of the most risky reasons for using your credit card to finance car payments – if you can’t afford to pay off your balance in full, charges can add up quickly.
  • Interest-free grace period. Canadian credit cards offer a minimum of 21 days interest-free, however some cards offer higher interest-free periods of up to 45 or higher.
  • Promotional periods. A credit card offer – such as a 0% or low balance transfer rate – will end after a certain number of months, and when this happens, the rate will revert to the standard purchase rate.
  • Rewards points. If you’re making a big purchase with a credit card, you might be able to earn rewards points or cash back doing it. Be sure to compare the value of the rewards points or cash back with the interest you may pay. Interest charges could seriously reduce the value of any rewards you reap.
  • Credit limit. You’ll need to make sure your credit limit is large enough to pay for some – or all – of your new car purchase.
  • Limits to your cash flow. Since your credit limit will be strained with the car purchase, you may have less credit to go towards paying off your bills and other expenses.

Compare credit cards

Name Product Welcome Offer Rewards Purchase Interest Rate Annual Fee Min. Credit Score Description
HSBC +Rewards™ Mastercard®
20,000 Points
2x points per $1 spent
11.9%
$0 annual fee for the first year ($25 thereafter)
Min. recommended credit score: 630
Get 20,000 Points (up to $100 in value), plus get a 1st year annual fee waiver. Apply by September 27, 2021.
BMO CashBack Mastercard
5% cash back
Up to 3% cash back
19.99%
$0
Min. recommended credit score: 660
Get 5% cash back on all eligible purchases in the first three months of card membership (up to max. spend of $2,000). Plus, get a rate of 1.99% on balance transfers with a 1% balance transfer fee for nine months.
Tangerine World Mastercard
10% cash back
Up to 2% cash back
19.95%
$0
Min. recommended credit score: 680
Earn an extra 10% cash back (up to $100) when you spend $1,000 on everyday purchases within the first 2 months. Until August 16, 2021. Plus, get a 1.95% interest rate on balance transfers for the first 6 months (valid within the first 30 days of account opening).
BMO Preferred Rate Mastercard
3.99% rate on balance transfers for 9 months
N/A
12.99%
$20
Min. recommended credit score: 660
Get a rate of 3.99% on balance transfers for 9 months with a 1% transfer fee. Plus, get the $20 annual fee waived in the first year.
American Express Cobalt Card
30,000 points
Up to 5 points per $1 spent
19.99%
$120
Min. recommended credit score: 700
Earn up to 30,000 bonus Membership Rewards points in your first year as a new Cobalt Cardmember.
Brim Mastercard
Up to $200 worth of bonuses
1 point per $1 spent
19.99%
$0
Min. recommended credit score: 700
Earn up to $200 worth of bonus points when you shop with Brim retailers for the first time through the Brim mobile app.
Tangerine Money-Back Credit Card
10% cash back
Up to 2% cash back
19.95%
$0
Min. recommended credit score: 680
Earn an extra 10% cash back (up to $100) when you spend $1,000 on everyday purchases within the first 2 months. Until August 16, 2021. Plus, get a 1.95% interest rate on balance transfers for the first 6 months (valid within the first 30 days of account opening).
SimplyCash Card from American Express
4% cash back
Up to 1.25% cash back
19.99%
$0
Min. recommended credit score: 700
Earn 4% cash back on purchases (up to $200 cash back) for the first 6 months of Cardmembership.
Choice Card from American Express
10,000 points
1 point per $1 spent
19.99%
$0
Min. recommended credit score: 700
Earn 10,000 Bonus Membership Rewards points within the first 3 months as a new Cardmember.
BMO Rewards Mastercard
10,000 points
Up to 2 points per $1 spent
19.99%
$0
Min. recommended credit score: 725
Get a bonus of 10,000 BMO Rewards points when you spend $1,000 in the first 3 months. Apply by October 31, 2021 . Plus, get a rate of 1.99% on balance transfers for 9 months. A 1% fee applies to transferred balances.
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How else can you finance a car purchase?

There are many other ways of financing your car purchase and they should all be considered carefully so you can walk off of the car lot feeling like you got the best deal possible.

  • Car loan. When you get a car loan, the car that you’re planning to buy is actually used as security for the loan. If you fail to meet all of your loan obligations, the lender has the right to seize your car. The interest rates are usually lower on this kind of loan since it has been secured by an asset.
  • Personal loan. When you take out a personal loan to purchase a car, you have to make regular payments like you would with any other loan. You can usually get a personal loan for one to seven years, and can choose between a secured or an unsecured personal loan. The type of loan and the loan term will influence both the interest rate and how much you’re allowed to borrow.
  • Car lease. Getting a lease for your car financing is a lot like renting, but you will be given an option to buy it when the lease has expired for a residual. A residual is a percentage or value that has already been agreed upon when the car was first purchased.

Bottom line

Even if you decide that using a credit card to pay for your car is the best option, credit cards do not offer much protection in the event that you miss a payment or pay late. In fact, credit cards will often heavily punish you for a missed or late payment. A credit card may save you money on your car purchase and provide you with more rewards points or cash back, but if not managed correctly, credit cards can also get you into trouble.

If you’d like to learn more about credit cards, head to our comprehensive guide here.

Frequently asked questions

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