Buying a car using a credit card
Some people buy a car with a credit card, but does it make sense for you?
Unlike some other loans, you don’t have to pay a set amount each month, so you can choose how much you pay back each month, as long as you meet the minimum monthly payments.
This all sounds good, but there are issues. Buying a car on a credit card might not work in the first place. Many dealers won’t accept a credit card, and even those who do, sometimes have a limit on how much you can pay by card, or charge up to an extra 3% for paying by card.
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, so check before you sign up.
With that, you’ll still be 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.
Buying on a credit card probably works best for people who don’t need credit. If you can save up enough in advance, then pay off the full amount immediately (or at least within the period of any 0% special offer you may qualify for), 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.
However, most people won’t qualify for a 0% credit card, and the typical APR rate is 10-15%, which is higher than most loans. Most 0% deals also only last a couple of years, so if you can’t transfer or pay off the balance by that point, it is quite risky.
- 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.
- 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.