Using A Credit Card To Buy A Car

Using A Credit Card To Buy A Car

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While it may be unconventional to the average consumer, there is nothing that legally prevents you from buying a car with a credit card. As long as your credit limit is high enough, you can put down a down payment or even a complete purchase with enough available credit.

With that said, many dealerships have a dollar limit on credit card payments. Merchants are charged a fee for credit sales, and those fees are a small percentage of the total sale. So on a large purchase, like a brand new car, the dealer could be spending hundreds or even thousands of dollars just on card fees alone. For this same reason, some dealers will place a 2-3% surcharge on credit card purchases to help offset the incurred costs. Exactly how much you can put on your card will be up to your dealer, but most will limit credit card charges to between $5,000 and $10,000.

Another potential option that is worth mentioning is getting an automakers' branded credit card. Much like a regular credit card, you earn rewards with every purchase, and you can redeem these rewards toward the purchase of a car. In theory, this is a viable option for those with good credit. However, you would need to spend a lot of money to earn enough rewards to buy a new car or even to make a significant down payment.

For many people, it might make sense just to try and look for a low-interest auto loan instead of charging a huge sum of money on their credit card. For drivers with good credit, some dealers may even offer 0% financing to well-qualified buyers. While it may not present the instant gratification that credit card reward does, it may end up being more financially beneficial in the long run.

But depending on your circumstances, you could also opt to pay for a car with a rewards credit card or card with a 0 percent introductory APR offer. If you have a credit limit of around or over $20,000, for example, you could potentially cover the cost of a car and earn rewards points at the same time.

If you find yourself in a financial situation where using a credit card to buy a car is beneficial for you because of a tempting sign-up bonus or 0 percent APR period, it may be easier to justify using a credit card to buy a new car.

Buying a car with a credit card can make sense if you can earn some rewards, save money on interest for a limited time or anticipate using that card for maintenance appointments or parts and accessory purchases.

Just remember to do the math and consider all the advantages and disadvantages before you take the leap. Using a credit card does let you access some perks, but you will only wind up ahead if you use credit responsibly and you have a solid plan in place to climb out of any debt you take on.

Advertiser Disclosure: Most, but not all, products in our articles are from partners who may provide us with compensation. However, opinions expressed here are author's alone, not those of any bank, credit card issuer, airline or hotel chain.

Credit cards are one of my favorite financial tools. When you manage them wisely, credit cards can help you build your credit rating. Additionally, credit cards offer valuable fraud protection, which can help you keep your money safe. But one of my favorite benefits of using a credit card comes in the form of points and miles.

A rewards credit card gives you the opportunity to get something extra out of purchases you needed to make any way. Over time, all those trips to the grocery store, tanks of gas and take out orders can add up to cash back in your pocket or perhaps points and miles you can redeem for free travel.

I knew that not every car dealer would be willing to let me pay for my vehicle purchase with a credit card. Businesses have to pay processing fees when they accept credit card payments, sometimes as high as 3% of the transaction.

Once we knew which vehicle we wanted, we started negotiating the price. After a bit of haggling (and letting the dealer know that we were prepared to pay for the vehicle in full that day), the car dealer knocked almost $1,000 off an already competitive sticker price. Only after we agreed upon a purchase price did we ask if we could pay for our purchase with a credit card.

I have no regrets about purchasing a car with my credit card. Because I hold the Sapphire Reserve, the 8,500 Chase Ultimate Rewards points I earned are worth 1.5 cents each if I redeem them for travel through the Ultimate Rewards portal. However, I plan to transfer the points to a Chase airline or hotel partner down the road and hopefully get even more bang for my buck.

2. Find a good rewards credit card sign-up bonus. Consider boosting your points-earning potential with a new rewards credit card (or two), and use your large purchase to satisfy minimum spend requirements.

Using a travel credit card to earn rewards for purchases you'd be making anyway is a great way to defray the cost of your next vacation, as long as you pay off your balance in full every month. It can even make sense to pay an extra fee (using services like Plastiq) to pay rent, mortgage or taxes with a credit card when you're working toward meeting a card's minimum spending requirement.

In the past, TPG readers have asked if you can use a credit card to buy a car. The short answer is, yes, but it's not exactly that simple. There are a handful of factors to consider before you pull out the plastic to pay for your next ride. Before you swipe or tap, make sure it's a good deal because getting a good price on the car is more important than earning rewards for the purchase. However, using credit cards for large purchases is a good way to stack up rewards, so let's look at when it makes sense to do just that.

Before you put a five-figure purchase on your credit card, you'll want to have the cash available to pay off your card in full. Otherwise, you'll end up paying an interest rate many times higher than what it would cost to finance the vehicle. The one exception to this is opening a card with a 0% APR offer. Be sure that the 0% offer applies to new purchases because there are usually fees (3%-5%) associated with balance transfers.

Buying a car with a credit card might take some legwork. For example, TPG Loyalty and Engagement editor Richard Kerr paid for a $40,000 car with The Platinum Card from American Express, but he haggled with five dealerships before he found one willing to play ball and allow him to use his card for the full purchase price. However, if you're charging a smaller amount on your card (to pay for the down payment or a portion of the car), you'll find more dealers willing to accept that deal.

Many dealerships are hesitant accept large credit card payments because of the process fees (up to 3%) they pay when you use a card. This is something to keep in mind when you're working out the purchase price. One strategy is to negotiate a price you'd be willing to pay for the car before you mention paying with a credit card, which, in turn, might invite another round of negotiations.

I'm more comfortable going for the low-hanging fruit (charging a portion of the payment). It can be worth it to pay some extra fees if you're going to earn a big introductory bonus that's worth many times what you'd pay. You might even be able to split a large payment across multiple cards and meet several minimum spending requirements at the same time.

If you want to keep it simple, you should take advantage of the American Express Auto Purchasing Program, which connects card members to 10,000+ dealers, who are willing to accept an Amex card for at least $2,000 of the purchase price. Check out this review of the Amex Auto Purchasing Program to learn more about when you should and should not use the program. This is a good choice if you don't want to bother with haggling at the dealership.

Once you have your dream car in sight, you'll want to get the most bang for your buck. Usually that means putting the purchase on a newly-opened card so you can earn its introductory bonus offer. But if you haven't recently been approved for a new card or two, then use a card that either:

If you want to earn the most value for your purchase, you should earn transferable points, such as Amex Membership Rewards or Chase Ultimate Rewards. The Blue Business Plus Credit Card from American Express earns 2x Amex points on the first $50,000 in purchases each calendar year, then 1x. So it's a solid choice, but right now, The Business Platinum Card from American Express has a welcome bonus of 120,000 Membership Rewards points after you spend $15,000 on eligible purchases with the Business Platinum Card within the first three months of card membership. A large purchase is a great way to not only earn the introductory bonus, but the Business Platinum card also earns a 50% bonus (1.5x Amex points) on eligible U.S. purchases of $5,000 or more (up to 2 million bonus points per calendar year).

With the Chase Freedom Unlimited or Ink Business Unlimited Credit Card, you earn an unlimited 1.5% back on purchases. Although these cards are technically cash-back credit cards, the cash back is earned as Chase Ultimate Rewards points, which can be redeemed for various rewards at a rate of one cent each. However, if you move your points from either of the Chase Unlimited cards to the Chase Sapphire Preferred Card, Chase Sapphire Reserve or Ink Business Preferred Credit Card, they can be transferred to Chase's 10 airline and three hotel partners.

The other option for maximizing your purchase is to use a card that will earn you valuable perks for hitting spending thresholds. If you're trying to earn Delta elite status, the Delta SkyMiles Platinum American Express Card and Delta SkyMiles Reserve American Express Card both earn Medallion Qualification Miles (MQMs) for hitting high spending thresholds in a calendar year. Or you could pick up a weekend getaway at a luxury Hilton property with The Hilton Honors American Express Business Card. Each calendar year when you spend $15