Can You Buy a Car With a Credit Card?

Buying a car for yourself is a pretty expensive endeavor, especially if you want to buy it brand new straight from the lot. The idea of just using your credit card to make the purchase may sound like a stress-free way to get the vehicle you need. You can even earn points or other rewards from your bank once you pay off this large purchase.

However, since cars can cost tens of thousands of dollars, it’s essential to know for sure if you can buy a car with a credit card before you head on to the local dealership with a Visa in your pocket. Some car dealers accept credit cards, but not all of them do.

Before you rush off, it’s best to take a step back and consider whether or not it’s best to purchase a car with a credit card. Continue reading to learn about all the pros and cons of such a purchase before swiping the card.

Exploring Alternatives

Given that the average price of a new car is about $37,000, most people will need a loan of some kind to purchase one. Utilizing your credit card can make the whole experience stress-free, but it’s best to explore your options in-depth before making the final decision. 

First of all, note that, while it’s true some buyers will opt for using a credit card to buy a car so they can earn rewards, this purchasing method is primarily used by people who already have the funds to pay for their car immediately.

They purchase the vehicle with their credit card, and then they pay it back within 30 days in full to get their credit card rewards.

Unless you already have the necessary sum to pay back your loan, you shouldn’t overlook the fact that credit card interest rates are anything but low. That means if you take too long to pay back your balance, you’re already spending more on your car, and the rewards you’ve accumulated will be wiped out, too.

The two ways around this would be paying back everything in full immediately or getting a credit card that offers a 0% introductory APR (more about this later).

So, is paying by credit card really the best deal? Or should you consider other options, such as auto loans and automaker’s cards?

Auto Loans

Sure, the credit card points sound fantastic, and the idea of getting a brand new car without anything coming directly out of your pocket is tempting, but there are downsides. Using a credit card to buy a car carries with it the possibility of you overspending on a pricey vehicle you can’t really afford and perhaps don’t even need.

This can seriously put you into a perilous financial situation. Looking into a low-interest auto loan may be a considerably better deal, especially if you take into account that some lenders will offer APRs as low as 0.99% to their clients.

Before opting for an auto loan, instead of reaching out for your credit card, we suggest you take the time to calculate all costs in both cases - not just the APR but any other fees and penalties that may apply as well.

Manufacturer’s Credit Card

Another option could be an automaker’s branded credit card. It’s not too popular, but automaker brands such as GMC and Chevrolet do have their own credit cards. Just like with a regular credit card, you can earn rewards with every purchase, and these rewards can even go toward purchasing a car.

This could be a viable option, but it’s important to note that with these types of credit cards, you’d have to spend a lot of money to get enough rewards to make a difference. Even if you were to spend $1,000 to $2,000 per month on your credit card for one year, it still wouldn’t realistically be enough for the down payment.

Cards With Special Car-Buying Programs

Talk to your card issuer before making any large purchases, whether it be paying for your new card in full or just the down payment. Some card issuers have special programs for customers who want to purchase cars, so you may be able to benefit from a program you didn’t even know existed. 

Contacting your card issuer before making any larger purchases will also help you avoid inadvertently triggering any fraud alerts. Besides, many banks have a limit on how much can be spent in one day. So regardless of how much you’re planning to spend on this big purchase, inform your bank first.

Things To Consider When Buying a Car With a Credit Card

Buying a car is a major commitment, but making this purchase with a credit card is an even bigger one. These are a few things you’ll want to take into consideration before making the next move.

Do Car Dealerships Take Credit Cards?

Since a car dealership is a merchant, it’s all going to depend on each individual car dealership. Some dealerships may be completely okay with allowing a customer to pay for their new automobile by credit card in full, while other dealerships may only allow credit cards to be used just for the down payment of the vehicle.

Why is that? It’s mostly due to the processing fees, as every transaction that uses a credit card will incur some kind of fee for the merchant to cover. In general, it’s best to first negotiate a price and afterward discuss the payment method.

What’s Your Credit Card APR?

“Can you buy a car with a credit card?” is not the only question that needs to be answered.  Should you do it is even more important, and the answer to that will largely depend on your credit card APR and reward program.

There are cards out there that offer low interest and high rewards, such as cashbacks, air travel miles, discounts, gift cards, and so forth. If you don’t have a credit card already or if you’re able to get an additional one, look into one that offers a 0% introductory APR.

Cards with zero-interest financing give you time to pay off your new car without incurring any additional charges. The introductory period typically lasts from 12 to 15 months.

Does Your Credit Card Come With Rewards and Bonuses?

One “hack” many will use is getting a 0% APR card with a big welcome bonus. This option can be tempting, but you also have to realize these welcome bonuses only work if you pay your card balance back in full within a set amount of time. Credit card hacking is a thing, but you need to do your research and calculate whether or not it’s something you can afford.

Something else to look into is the rewards your credit card offers. One of the major perks of owning a credit card is the big rewards that can come in bundled with it. Some rewards can include cashback deals, travel rewards, discounts, and a lot more.

If you frequently travel, you can always consider one that offers discounts on hotels and airlines, concierge services, and more.

If you’re dead set on using a credit card to make the purchase of your new car, then go ahead and try to benefit from it as much as possible. As long as you pay your credit card statement as soon as possible, you’ll be able to enjoy all the perks and rewards that a credit card has to offer.

Remember, credit cards can be a helpful financial tool, but you need to stay on top of your monthly payments.

What’s Your Credit Limit?

One big element you shouldn’t forget to factor in is your credit card limit. Not everyone is given a hefty credit limit to purchase a car (unless you’re buying a used one). Some credit cards come with car-buying programs, which can be a nice perk.

If your credit card limit is far too low to purchase your desired car, then look into building stronger credit so your limit can increase over time or maybe consider other methods of payment.

So, Should You Use a Credit Card To Buy a Car?

In short, maybe. It’s important to keep in mind that some dealerships just won’t accept credit cards due to the high transaction fees they would have to cover. Some may allow for using a credit card to buy a car in full, and others may only allow you to pay for the vehicle partially, for example, to make the down payment.

Each dealership has its own policy, so hunt around to see which one will accept cards.

While there are benefits to buying cars with a credit card, it’s also important to understand that this can be far more expensive than other payment methods due to interest. There’s also the chance that this can hurt your credit score if you fail to pay off the amount quickly enough.