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Advice

First published: 4th May 2015

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Advice

Buying a car using a credit card

Does it make sense to buy a new car with a credit card?

First published: 4th May 2015
You can take advantage of special offers, but not every dealer will accept them; and even those that do may not let you put the full amount on a card
Pros:
  • You can take advantage of special introductory offers like 0% finance
  • Some cards will offer rewards
  • You get extra protection through the Consumer Credit Act when buying on credit
Cons:
  • Not every dealer is prepared to accept payment on a credit card
  • Even if they do accept cards, they may not let you pay the full amount on one
  • Interest rates can be high – especially after an introductory offer ends
Can I buy a car with a credit card?
Buying a car on a credit card is just the same as buying anything else on a credit card. The full amount is paid up front and then you pay the credit card company back over the coming months, paying interest on the outstanding amount.

Unlike some other loans, there are no set monthly instalments, so you can choose how much you pay back each month, depending on your circumstances.

This all sounds very good, but one of the problems is that buying a car on a credit card might not work in the first place at all. Many dealers simply won’t accept a credit card in the first place, and even dealers who do sometimes have a limit on how much you can pay by card.

So, it’s possible you may not be able to fund the whole purchase on the card; and, even if the dealer will let you, it’s also possible that your credit card won’t; some companies have a limit on the value of an individual purchase, so you should check that before you sign up.
Top Tips
  • One of the big pluses to paying this way is that, as long as you spend between £100 and £30,000, you get extra protection as a consumer through the Consumer Credit Act. And the beauty of it is that you don’t have to have paid the full amount on the card: you’ll still be covered for the full amount even if you just pay the deposit using your credit card. If, for example, you buy a car from a company that goes bust before delivering the car, you won’t end up out of pocket.
  • Ironically, buying on a credit card probably works best for people who don’t need credit. If you can save up enough in advance and then pay off the full amount immediately (or at least within the period of any 0% special offer) then you won’t have paid any interest, but you still get all the benefits, such as extra consumer protection, as well as any cashbacks or promotions the credit card company happen to be running at the time.
Related topics: New car finance