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Can You Buy a Car with a Credit Card?

Updated on February 9, 2011

Buying a Car with a Credit Card - Good Idea?

Can I Buy a Car with a Credit Card?

In a word: YES, you can buy a car with a credit card. However, the only time when this is really a good idea is when you have the funds available to pay off the charge immediately.

Some buyers who have the money to pay with cash opt to buy their card with their credit card for one simple reason: credit card POINTS (or cash-back, depending on your card issuer and options). Some credit card companies offer as much as 5% cash-back when users charge up to a specified amount on their account, such as $50,000. That's $500 cash-back in your pocket. And points, of course, can be cashed for everything from frequent flier miles to hotel stays, essentially entire vacations.

But you should remember this: car dealers are not likely to love the idea of paying for your car with a credit card. Why not? Because card issuers charge vendors anywhere from 1.5-3% of every purchase in processing fees. For a $30,000 vehicle, that could translate to $900 less profit for the dealer. That said, people can and do buy cars on their credit cards. It just make take additional negotiation with the dealer, and you might not get quite as low of a price as you wanted on the car, meeting the dealer somewhere between in order to cover the extra charge they face.

Down Payment? Not Enough Cash? Don't Use Your Credit Card!

We should reiterate: you should not consider paying for a car with a credit card unless you have the cash in your account to pay down the purchase right away.

The numbers speak for themselves on this. For instance, roughly 5% of car purchasers put some - if not all - of their down payment on a credit card. The average amount charged was just over $3000. So how many of those people paid down that $3000 in the next 3 months?

Fewer than 12.5%.

Some buyers may think that using a credit card will allow them to avoid the hassle of figuring out financing, but remember that the interest charged by your credit card issuer is almost certainly WAY higher than the APR rate you'll receive on your auto loan.

And let's not forget your credit score.  If you have a big charge on your credit card and can't pay it off, it could do serious harm to your credit rating.  And if you have sufficient credit to purchase a whole car on your credit card, then you could almost certainly get a car loan from a bank, credit union, or even dealer for less.


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