Your initial reaction, if asked by someone, can I buy a car with a credit card, would probably be to laugh incredulously. Why would anyone want to buy a car with a credit card? Believe it or not, there are some valid reasons in which you might want to purchase a vehicle via a credit card. To do this, however, you must have enough money to pay for the vehicle in full. In some situations, you can actually make money (or other rewards) by buying a car if you use a credit card to pay for it!
Does the Dealer Allow You to Pay With a Credit Card?
Before you should even consider buying a car with a credit card, it’s important to find out if the dealer you’re buying the vehicle from will allow it. Some dealers, for example, will only allow buyers to pay for a portion of the car’s value with a credit card. Others, however, will permit you to pay the entire balance with a credit card, if your card’s limit allows. Check with the dealer first so that you will know the situation.
Is Your Card Offering a No-Interest Promo that You Can Pay Off Within a Certain Time?
If you own a credit card with a high enough limit to buy a car, and that card has offered you zero percent interest on new balances or balance transfers for a set period of time, it might make sense to use that credit card to buy a car. This would only work if you know that you will be able to pay off the balance within the promotional period of time. Watch out, though – many cards will jack up the interest rate after that period of time, and you could wind up paying 25 percent or more in interest after the promotional period! Only do this if you’re sure that you can pay the card off during the promotional no-interest period of time.
Does Your Card Offer Cash Back or Rewards?
Say the car that you’re thinking of buying costs $10,000. You have the cash to pay for the car. You also, however, have a credit card that offers travel rewards or cash back on purchases. That card also has a limit high enough to pay for the car. In this case, it would make sense to use the credit card to pay for the car, earn the rewards or cash back, and then pay the credit card bill in full almost immediately. In this way, you are actually making money by spending money! Just be sure to pay the credit card bill before interest accumulates, or you’ll be defeating the purpose.
It All Comes Down to Cash on Hand
The decision whether or not to use a credit card to buy a car really depends on how much cash you have available. Do you actually have enough cash to pay for the car, in full, right now? Does the card you want to use offer a signup bonus or other rewards? If so, you can use the card to pay for the car, then turn around and pay your credit card bill immediately. You will be earning the rewards or special offer from the card company without paying their high interest rates.
On The Flip Side…
If you don’t have cash on hand to pay for the car, this, of course, does not make sense. Why pay 15 to 25 percent in interest rates on the credit card, which would then be acting as a car loan with extremely high interest? If you don’t have the cash, don’t use the card. You should be able to get a much better auto loan offer, with much lower interest rates. Shameless plug: if you’re buying a used car and manage the transaction through Trusted Sale, you could qualify for financing without having to purchase from a dealer!