It is possible to buy a car using a credit card. Doing so can offer you extra protection and, in some instances, it can prove cheaper than some other finance options.
There are, however, a number of caveats. You probably won’t be able to buy the car outright using just a credit card as there are limits in place.
You’ll need a high credit rating and a high limit on your credit card. You’ll also need to check whether your preferred dealership accept credit cards at all.
And even if the dealer will let you pay on card, it’s possible your credit card company won’t: some companies have a limit on the value of an individual purchase (usually £5,000), so check the contract before you sign up for a card.
Why pay for a car using a credit card?
Paying for a car using a credit card isn’t straightforward, so why do people do it?
In some cases, credit cards allow you to take advantage of special offers and low introductory rates. This relies on you having a limit to cover the whole car and meeting minimum monthly payments, however, so check your limit and monthly budget as you investigate.
Credit card payments are typically lower than other finance agreements, so some are tempted to not pay a larger amount, though it may mean it takes a lot longer to pay off the debt.
Do car dealerships accept credit cards?
Not every dealership will accept credit cards, and even those that do may not let you put the full amount on a card. Dealerships may also charge a card handling fee, which could be up to three percent.
If you’ve seen a car you like, contact the dealership to discuss your options. Contact details are available in the Auto Trader advert.
Car dealer won’t accept credit card
If the dealership won’t accept credit card as a method of payment, but you’ve got your heart set on the car – investigate a loan or finance deal to make monthly payment.
How paying for a car with a credit card works
Buying a car on a credit card is the same as buying anything else on a credit card. The credit card company pays the full amount up front, then you pay the credit card company back over the subsequent months. You’ll normally pay interest on the outstanding amount, but if you pay off the full amount on time, you may not have to pay interest.
As mentioned above, many dealers won’t accept a credit card, and those that do may have a limit on how much you can pay by card. You may therefore have to pay some on credit card and some via cash, or another method of payment.
Credit card protection when buying a car
If you spend between £100 and £30,000 (just remember, it’s rare to get a credit card limit over £5,000), you get extra protection as a consumer through the Consumer Credit Act.
Under Section 75 of the Consumer Credit Act, your card provider should share responsibility with the company you paid for goods or services. This means they could provide you with a refund. There are, however, a number of caveats to this, so make sure you research properly before you commit.
Should you be covered, you may find that you’re still covered for the full amount even if you just pay the deposit using your credit card. For example, if you buy a car from a company that goes bust before delivering the car, you won’t end up out of pocket.
Should I pay for a car on a credit card?
As with anything, there are pros and cons to paying for a car with a credit card. Make sure you research properly before you commit. Speak to your bank about repayments, double check your budget and make sure you can afford the repayments.
Consider all your options before you commit to one, and always check the small print of a contract before you sign.
Pros of paying for a car using a credit card:
• You may be able to take advantage of special introductory offers like 0% interest for a period of time. • Some cards may offer rewards. • You may get extra protection through the Consumer Credit Act when buying on credit.
Cons of paying for a car using a credit card:
• 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. • Dealers may charge a surcharge for paying using a credit card. • Interest rates can be high, especially after an introductory offer ends. • Not everyone will qualify for a high credit limit, or a 0% card
0% APR credit card finance
Buying on a credit card could suit people who don’t need credit.
If you’re eligible to a 0% credit card and can afford to pay off the full amount immediately, or make the payments within the period of any 0% special offer you may qualify for, you won’t pay any interest but you’ll still get all the benefits, such as extra consumer protection, as well as any cashbacks or promotions the credit card company are running at the time. Most people won’t qualify for a 0% credit card, and the typical APR rate is 10-15%, which is higher than most loans. So always compare your options before you commit – don’t carry on down the credit card route if it looks like an increasingly expensive option.
And if you do qualify and secure a 0% credit card – remember most 0% deals only last a couple of years, so if you can’t transfer or pay off the balance by that point, it could prove expensive in the long term.
More on credit cards
If you’ve never had a credit card before, we encourage you to research the pros and cons before you commit to one. Some things to keep in mind are:
• You need to be at least 18 to apply for a credit card, though some cards are only available to those over 21 years old. • The credit card provider will assess your credit rating when you apply. A higher credit rating could improve your chances of getting a credit card, and you may be offered better interest rates. • You’ll need to make at least the minimum payment each month. Missing payments could damage your credit rating. • If you don’t pay off the monthly balance on time, you’ll have to pay interest on any outstanding debt. The interest rate for credit cards can be much higher than on personal loans, so if you miss payments or fall behind, this can add up quite quickly. • You may also have to pay additional fees or penalties for missing a payment or exceeding your credit limit. There may also be annual or monthly fees for using the card.
You can learn more on Money Advice Service, or other resources available online.