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Should You Buy a Car With a Credit Card?

If you can pay your car off within a card's 0% introductory APR period, the potential savings are substantial.
buying car

Everyone knows that when you want to buy a car, it's a good idea to shop around and make sure you get a good deal. But what many people fail to research is the best way to pay for that new vehicle. While it's easy to just leave everything to the car lot's financial department, this might not be the best idea.

These days, many shoppers are turning to credit to pay for their new ride. However, every card comes with its own set of pros and cons. If you're thinking of buying a car with a credit card, here's what you should know.

Reasons to Use a Credit Card

With so many banks and other lenders available (and likely eager to finance your purchase), why would you even consider using a credit card? For the right shopper, the savings can be substantial.

0% Interest Deals

If you have good credit, you already have your pick of some of the best financing offers available — whether you choose a loan or a credit card. Credit cards, however, often provide new cardholders with 0% introductory APRs on new purchases for as long as 21 months. For example, if you sign up for something like the Citi Simplicity Card, you get 0% on purchases and balance transfers for 21 months with no annual fee.

It's important to consider whether you can pay off your car within that 0% period. Otherwise, you could end up paying more in interest than you would with a traditional car loan.

The APR after the intro period can vary from 14.24% to 24.24% though, so it's important to consider whether you can pay off your car within that 0% period. Otherwise, you could end up paying more in interest than you would with a traditional car loan. But if you can pay it off in time, you could save quite a bit.

Rewards Programs

You can't ignore the value of credit card rewards programs. Whether you use them to earn cash back or airline miles, a car purchase can be worth hundreds of dollars in extra rewards. While this might seem like a good way to get some money back for your purchase, make sure you check the interest rate and fees you're paying on the card to determine if those rewards are worth it.

What's more, credit cards with rewards programs generally charge high APRs. This means it's best to pay off your balance, rather than carry it from month to month. With a car purchase, you'll need to have the cash on hand to cover your card balance, in order to get the most value out of your rewards.

SEE ALSO: 8 Best Credit Cards for College Students

If you have the cash, consider cards like the Capital One BuyPower Card. This card gives you 5% earnings on your first $5,000 in purchases every year, and unlimited 2% after that. You can then redeem your earnings for a GM vehicle.

Things to Consider Before You Buy

With all this being said, using a credit card to buy a car makes sense in only a couple of instances. And there are cases where paying with a credit card is a really bad idea. If you have a poor credit score, for instance, steer clear of using a credit card to buy an automobile.

Further, if you need time to pay off your vehicle in payments and can't cover the balance anytime soon, charging it to a credit card is going to cost you much more in the end. The same goes for using a credit card with a high interest rate. You'll just end up paying more in interest than your car is worth.

SEE ALSO: The Top 5 Places to Check Your Credit for FREE

Before you head to the dealership to charge a car to your credit card, these are the questions to ask yourself:

  • Will I qualify for a high enough credit line?
  • Is my credit score in the upper 700s?
  • How much of the cost will the dealership allow me to charge?
  • Will the APR and card fees cost me more?
  • How soon can I pay off the balance?

Once you have answers to these questions, you'll know if using a credit card to buy a car really makes sense for you.

Readers, have you ever paid for a car with a credit card? If so, how did the experience work out for you? Let us know in the comments below!

Contributing Writer

Christina Majaski is a freelance writer and mom of daughter Chloe and dog Monty in Central Minnesota. She has covered social media, personal finance, law, business, and travel for various online and print publications since 2003. You can read her work online at Wise Bread, Digital Trends, PayScale, and many others.
DealNews may be compensated by companies mentioned in this article. Please note that, although prices sometimes fluctuate or expire unexpectedly, all products and deals mentioned in this feature were available at the lowest total price we could find at the time of publication (unless otherwise specified).
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Scroogus Maximus
While credit card companies (those insane enough to let you buy a car on credit) may not require collision, state laws frequently do. That said, the majority of states only require liability, and the terms of a CC usually make buying a car a REALLY bad idea.

I've found doing research online, walking in with a handful of Edmunds valuations, and the phrase "That's just not good enough" to be remarkably effective on breaking down dealers, especially when I make it obvious that I have all day- and I'm not the one losing money if I walk out (Walking out, btw, is also very effective. Actually doing so has caused salesmen to run after me, begging.) After 4 hours of negotiating, I ended up saving around $750/hr.
I've only been able to use the credit card deal on smaller buys, as others have pointed out. But, for those kinds of purchases -- say a $3000 motorcycle -- using a 0% for 18 months offer can let you pay it out for under $200 a month at no cost whatsoever.

Insurance-wise, this must depend on the state. I've been pricing insurance for three cars with three drivers, and collision is perhaps 10% of what I'm paying. Liability is by far the biggest expense. I'd only drop collision if it makes no financial sense for the car. If the car is worth under $1,000, I'd skip collision. Beyond that, I'd look at the value of the car TO ME. Generally, collision isn't such a bad deal.
An additional benefit is that Credit Card Companies don't require Collision insurance on your purchase. This adds a substantial savings if you are a careful driver! Collision is a huge part of your insurance bill!
Dano Da Mano
I bought a slightly used car at a dealer in 2006. First, I negotiated the best deal I could get, then asked for a discount or any extra perks if I paid all cash or financed through them. They gave no additional concessions, so I pulled out the credit card. When it was all done, they allowed me to pay only $3000 with a credit card, the rest I paid with a check.
Paid the credit card bill off at the end of the month, so made out with the credit card rewards points.

@ Tony
Well, I actually already had the house/mortgage, and paid it off with a few credit cards ~$85K. Did this about 15 years ago, back when balance transfer fees could get waved or were typically capped at $50 or $99 a transaction (instead of the 2% or 3% no cap now). I floated my "mortgage" balance on 0% credit cards for ~3-4 years before I had it completely paid off. All in all, a lot better than the 6.75% interest I would have been paying for the next 15-20 years! Saved over $5K in interest the first year!
You really should take this article down, obviously, you have overstepped your knowledge of the topic.
I live in a sparsely populated state, used cars are expensive, have lots of miles on them & if a car is over 10 years old, you only license it once! I did a search for dealer only cars with less than 70k miles under $6k with clean car fax. I bought a luxury car 500 miles away for $5.4k with a credit card that gives me 2% cash back & paid it off when the bill came. The rebate covered my plane ticket. I spent a few hundred to fix things and now have a nice, cheap car. Last year, I put over $40K into various investments, have no debt and am doing fine. My investments make over $120k/yr so I don't have to work & I'm 6 years away from retirement.

My mother-in-law made a comment about the wealth of my brother-in-law. I asked her why she thought he was wealthy and she replied "look at the car he drives" but I know he's a paycheck away from bankruptcy. Have you seen the drop in value of new cars?
Tony Balogna
Next they will be telling you to buy a house on your credit card.
I've bought two cars in Manchester NH (from Quirk Dealerships) ... They accept up to $2000 on a credit card. Same for a lease. If the deal is $3,000 down and $150/month, a credit card is only accepted for 2K of the initial down payment.

I have also purchased cars in Massachusetts. When you negotiate the best deal that you can score, the dealership is assuming that you are planning to pay cash or check. A credit card cost them 2 or 3% more, and it seems pretty clear that they will factor that into any credit card deal. Additionally, most credit cards do not protect the dealer from fraud. So, when you explain your intent to finance the purchase, they will steer you toward bank financing or their own dealership financial partner.
I tried to pay for a car at Carmax with my credit card. The salespeople looked at me like it was crazy.
Fall Guy
Dealnews desperately looking to write stories that are senseless.
I have actually purchased a car with a credit card. It was a circumstance where the stealer worked the old what will it take for you to leave with a car today. I advised that I was a cash purchaser and that it would have to be a credit card or I would come back next week with a check. I did not need to leave today with the car. He wanted the sale on his books. Typical process where I was sent with the paperwork to the finance person who advised me that I could not pay full purchase price by CC. I advised to call sales manager who overrode her. She stated, this is a first. Took the card and we drove off with the car. This is the one and only time that this has worked. Most limit to 3 or 5 thousand as others have stated.
I've put some of my down payment with a credit card to get the miles reward, but in CA each time I've been limited to a maximum of $5,000.
Ms Christina Majaski Clearly you have never done what you are advising others to do. Can you tell us any place that accepts credit cards for such purchase?
Maybe the author can share with us what auto dealership will allow you to purchase the car on a credit card?
There is one big problem with this article.
Dealers will not allow you to purchase a car with your credit card. The writer should have known this before writing this.
In 2012 I bought a new car and wanted to pay for it with a credit card. I had the cash to pay in full I just wanted to get the rewards. The dealer said they wouldn't accept it so I just wrote them a check.
Agreed, dealerships are usually willing to let you put the down payment on a card, but not the whole vehicle. Their profit margins on new vehicles are smaller than you might think (yes, I know about holdback, but still), and the credit card fee would take a serious bite out of it.
I have had the exact same experience as drt1 where they limited me to $3,000. They gave a discount if I financed with them -- paying cash would actually cost more. I financed and paid it off within the week.
When I wanted to use a card to pay for a vehicle it was limited to $3000 or there would be a 3% charge. Dealerships don't like to take the hit that the card companies charge. In the 60's, my father would always ask for a cash discount and would pay with a card if none was offered.