I’ve had a couple people ask me this question recently. The answer might surprise you. Some places will actually let you buy your car with a credit card, but should you do it? Why would you do it? And how would you go about doing it right if you wanted to do it?
First thing, I should say that if you can’t afford to buy the car outright, and you’ve exhausted all other options to finance it then you shouldn’t even be thinking about this idea as an option. This will only put you more into debt, and with terrible rates mind you. You should only consider this option if you’re good with your money and you’re looking for ways to take advantage of your credit card for cash back or points.
Can you really buy a car with a credit card?
The only way to answer that question is to ask the dealership. It’s up to them whether or not they’ll let you use a credit card to pay for your car. From my experience it’s nearly impossible to find a dealership that will take your entire car purchase on a credit card.
If you plan on paying for your car in cash then it would make sense to put it all on a credit card if you could and then you could immediately pay off the credit card. In return you would get cashback or rewards points from making the purchase with the card.
The most recent new car I bought was at the Toyota dealership and they would only take a maximum of $5,000 on a credit card. So I charged the full amount and got the benefits from my credit card in return.
Dealerships don’t really want you to use credit cards for the purchase for a host of reasons including the cost that they incur when you use your credit card (they usually have to pay around 2% or so for the transaction). They also want to try and get you to finance through one of their programs so that they can possibly benefit from it.
One probably obvious thing I forgot to mention is that you need to make sure you have the credit limit allowance to make whatever purchase your making. Do you have the high credit limit you need for the car purchase? If you don’t then you’ll need to raise your limit before you make the purchase.
Using your credit card for a low APR
I talked about how you can use your card to get cash back credit or rewards points, but you can also use it to take advantage of a low APR is you’re not going to pay it off immediately. The trick with this one is that you have to read the fine print of your credit card and then decide if it makes sense for you to take advantage of an offer.
The types of offers I’m talking about are usually new and introductory offers, and they usually only last a year or two. Sometimes you’ll find offers where you can get 0% APR for 2 years. The important thing to remember is that you need to be able to pay whatever balance you have on the credit card before that introductory offer expires because once it does your rate will shoot back up. So if you can’t plan to pay off your credit card debt before time expires then you’ll likely be better off taking a loan from the dealership or somewhere else.
The credit card can be a great way to save money on interest if you use it correctly like this. If you’re not sure you can allocate the right amount of money each month so that you’re paying off your car loan on time and you’re paying off your credit card balance before the rate shoots up then don’t put yourself down this path. It can be hard to get out of debt, and this strategy should be reserved for people that are responsible with their debt.