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Can you buy a car with a credit card — and should you?
It depends on your dealer — and it's wise only if you can pay off your purchase quickly.
Updated
When buying a car, you’ve got a few different options. They include — but aren’t limited to — a personal loan, car loan or lease agreement.
You may also be able to use a credit card, which can be a good option especially if yours has a low-interest promotion. However, buying a car with a credit card carries risks, and you’ll want to take care to minimize interest.
Can you buy a car with a credit card?
This depends on your dealer. If you’re thinking about buying a car with a credit card, ask your dealer if it accepts plastic. Also, ask which card networks it accepts — for example, Visa, Mastercard, etc.
Should you buy a car with a credit card?
For many, the answer is: Yes, if you can pay it off quickly, and if you earn rewards.
Credit card interest is the main factor that affects whether it’s a good idea to buy a vehicle with your card. Consider these statistics:
- The average credit card APR is around 17%.
- Meanwhile, you can often get a car loan for under 5% APR if you have a good to excellent FICO score.
Because credit card APRs tend to be much higher than those of auto loans, plastic tends to be a poorer option. Still, consider these pros and cons to decide whether using a card is right for you.
Can you pay your car loan with a credit card?
Yes, it’s possible to pay your car loan with a credit card. You’ll need to make a balance transfer, so a card with a long 0% intro APR period on balance transfers would be the best choice.
Note: Card issuers will automatically decline balance transfers within the bank or with affiliated institutions. This means if your car loan is from Capital One, you will not be able to make a balance transfer to a Capital One credit card.
How to buy a car with a credit card
If you’ve decided using a credit card is a smart choice, here’s how to get your next car with it.
- With your dealer, negotiate and settle on a price for your car.
- Verify that your dealer accepts credit cards and that it won’t add a surcharge for using a card.
- Select a credit card to use — preferably one with a 0% intro APR or rewards.
- Pay for your car purchase with your card.
- Pay off your credit card balance immediately or before your 0% intro APR expires.
What if the dealer wants to add a surcharge for using a credit card?
Your best defense is agreeing on the price of the car with your dealer before discussing payment options. This way, you’ll know if your dealer wants to add a surcharge.
What if the dealer won’t accept a credit card for my purchase?
Per merchant agreements for many credit card companies, businesses must accept credit cards for all transactions if they do so at all. Your dealer may accept cards for merchandise or servicing, which means it likely must do so for car purchases as well.
If using a credit card is really important to you, you can always choose not to buy the car. Coincidentally, walking away from a deal is among your best negotiating tactics with a car dealer.
Compare credit cards for buying a car
If you’re looking to make a direct car purchase with your card, look for a long 0% intro APR period on purchases. But if you’re looking to pay a car loan with a credit card, look for a long 0% intro APR period on balance transfers.
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Other things to consider when buying a car with a credit card
- Annual fee.
Many credit cards come with annual fees. Consider this when working out how much this method of buying a car will cost you. - Credit card surcharges vs. auto loan origination fees.
An auto loan may come with an origination fee, which is usually 1% to 2% of the loan amount. Compare this cost with a potential credit card surcharge. - Be aware of promotional periods.
A 0% intro APR will end after a certain number of months. When this happens, your interest rate will revert to the standard purchase or balance transfer APR, which could be much higher. - Rewards points.
Compare the value of your rewards with the interest you may pay. Interest charges could seriously reduce the value of any cash back, points or miles you earn from your purchase. - A car purchase could limit your cash flow.
Because your credit limit will be reduced with your car purchase, you may have less credit for paying your bills and other expenses.
Other ways to finance a car purchase
There are other ways of financing your car purchase. Consider them in addition to credit cards, so you can walk off of the car lot feeling like you got the best deal.
Car loan
When you get a car loan, the car you are planning to buy is used as security for the loan. If you can’t meet 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 to an asset.
Personal loan
When you take out a personal loan to purchase a car, you must make regular payments like you would with any other loan. You can spread these repayments out anywhere between one to seven years. You can either get a secured or unsecured personal loan for car financing, and this will influence both the interest rate and how much you are allowed to borrow.
Car lease
Getting a lease is a lot like renting. You can put a down payment on a car, after which you’ll make monthly payments for as long as the lease lasts.
You’ll have the option to buy the vehicle, for a residual, when the lease has expired. The residual is the wholesale value of a car at the end of the lease, and it’s set by whoever finances the lease.
Bottom line
Even if a credit card turns out to be the most suitable option for you, cards don’t 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, but if not managed correctly, it can also get you into trouble.
Ultimately, you should only use a credit card for a car purchase if you can pay off your balance quickly — and if you’ll earn rewards.
A car loan is a strong alternative, often coming with much better interest rates.
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