[The Ultimate Guide] How to Buy a Car With a Credit Card

Do Car Dealers Accept Credit Cards for Car Purchases? 

Yes! Some dealers accept credit cards for the entire car purchase. Again some may only allow you to make a down payment using a credit card, while others won't accept credit cards. So, it depends on the car dealer you are buying from. 

People often wonder why some dealers don’t accept credit cards for car purchases. It’s because of the processing fees they would pay for the credit card transaction. Whenever you pay with a credit card, the auto dealer will pay processing fees of about 1% to 3% or more. 

That is why most dealers would rather accept cash, money order, personal checks, cashier checks, ACH transfers, etc. 

Note: If a dealer accepts credit card payments, they tend to include the processing fee to the car's original cost. So, you may end up paying more than when you use non-card payment methods. And if you are to bear the cost of the merchant processing fee, it’s not a good idea to buy a car with a credit card. 

Is It Good to Buy a Car With a Credit Card? 

Well, it’s relative. Buying a car with a credit card has its pros and cons. 

Pros:

• It’s a good option if you are cash-strapped. 

• You get the title and ownership of the car immediately. 

• You get reward points or miles whenever you make any purchase with a credit card; this includes cash purchases. 

• Some credit cards give you a 0% introductory APR bonus for about 12 to 24 months. So, if you have the means to pay off the entire balance before the 0% APR period elapses, you can tactically avoid the additional cost of an auto loan. 

Cons: 

• Interest rates on credit cards are higher. 

• It will impact your credit scores if you can’t pay off the balance quickly. 

• Most times, you will be the one to bear the cost of transaction processing fees. 

Things to Consider Before Using a Credit Card to Purchase a Car

If you decide to use a credit card to make a complete or partial payment for your car purchase, you should consider the following:

#1 High Credit Card Interest Charges 

Generally, credit card companies charge high-interest rates. So, before making a car purchase with a credit card, ensure you can pay off the balance within the introductory 0% APR promotional period. Otherwise, you may be battling with debt for a long time. 

For instance, the average APR for a credit card accruing interest is 18.43%. And this is the highest it has been since the Fed began tracking in 1994. 

So, if you can’t make an outright payment for your car purchase and can’t pay off your credit card balance before the 0% APR period elapses, don’t buy a car with a credit card. Instead, consider taking an auto loan. You can get a 48-month repayment period auto loan at an interest rate of 5.15%. 

#2 Your Credit Limit and Utilization Ratio

Your credit limit and utilization ratio are essential considerations when using a credit card to purchase a car. 

Your credit limit is the maximum amount you can charge on your credit card. The credit utilization ratio is the percentage of the credit unit you have used. That is the amount of credit you use compared to what you can access. 

And when your credit limit is low, you can’t use your credit card to buy a car without exceeding your limit. Even if your credit limit is high enough to pay for a car, it’s not advisable. It will lead to a higher credit utilization ratio which can often lower your credit score. 

To maintain a healthy credit score, you must keep your credit utilization ratio below 30%. 

For instance, if your credit limit is $20500, your credit utilization shouldn’t exceed $6150. Even if you want to buy a car with a credit card, you can’t use more than $6150. Otherwise, it will affect your credit score. 

#3 Reward Credit Card Potential 

A reward credit card is a credit card that rewards you for your purchases. It offers bonuses in cashback, points, or travel miles for every dollar you spend.  

You can always redeem your rewards for money-saving opportunities like flight bookings, online shopping credits, and statement credits. 

And some reward credit cards don’t charge an annual fee. So, if you decide to buy a car with a credit card, you should use a reward credit card. It’s a great way to earn valuable rewards without much effort. 

Most reward credit cards offer a kickback of around 1% to 5% of purchases. So, if you buy a car worth $10000 with a credit card, you get a kickback of $100 to $500. 

#4. Car Manufacturer Credit Cards 

A car manufacturer credit card is another good payment option to finance your car. These automakers' branded credit cards are not so different from the regular ones, just that they are made by car manufacturers and offer huge rewards for every purchase. 

And you have the option to redeem these rewards towards the purchase of a new car. But you can take full advantage of the car manufacturer's credit cards only if you have a good credit score. 

Additionally, you need to spend a lot of money to earn enough rewards to buy a car or make a significant down payment. 

For instance, a typical car manufacturer credit card would offer you a 5% kickback on the first $5000 in spending each year. And you also get an additional 2% of all spending thereafter. If you keep $1000 a month on a manufacturer card, you will get about $315 worth of rewards yearly. 

Pros:

•  They offer huge rewards for every purchase made. 

• You can redeem your rewards towards the purchase of a new car. 

• You get a 5% kickback on the first $5000 in spending each year. 

Cons:

• It’s not a viable option for people with poor credit scores. 

• You need to spend a lot of money to earn enough rewards to buy a car or make a significant down payment. 

Buy a Car With a Credit Card in 4 Steps 

Step 1 Check With Your Credit Credit Issuer 

If you buy a car with a credit card, you must notify your card issuer first. They need to be aware that you want to buy a car and charge a huge amount to the card.  

Contacting your credit card issuer ahead of time helps avoid unnecessary delays and hang-ups during your transaction. Charging a large amount of money on your card could trigger a fraud alert.

And if your creditors aren’t aware, you can’t complete the purchase. 

Step 2: Look For a Dealer Who Is Willing to Accept Credit Cards as Payment 

The next step is to look for a dealer who is willing to accept credit cards as payment. Some dealers don’t accept credit cards for car payments, while others accept.  

So, do your findings and come up with a list of dealers who are willing to accept credit cards as payment. Also, ensure that you don’t incur an additional purchase cost with your credit card. 

Step 3: Evaluate Potential Risks 

Potential risk evaluation is crucial when buying a car with a credit card. I know you are eager to get a new car with your credit card. But you need to consider potential risks like; the credit card being a more expensive option in the long run.  

If you can’t pay off your balance quickly, it could lead to overspending, and when you don’t manage the process well, it could hurt your credit score. 

Step 4: Make a Plan to Pay Off Your Balance in Time

As you plan to finance your car purchase with a credit card, you should also make plans to pay off your balance in time. Ensure that you pay off the balance on the credit card before the 0% intro APR promotional period.

If not, you will end up paying an APR as high as 18.43%. Unfortunately, it will hurt your payment history and credit score when you miss your payment.

Get a Lower Interest Credit Card With CreditYelp

CreditYelp is an online broker that helps clients get the ideal credit card deal based on their particular financial situation. It provides you with exhaustive and objective information as well as professional comparison and evaluation to help you choose the credit card suitable for your requirements.  

Steps to Get a Lower Interest Credit Card With CreditYelp 

It’s easy to get a lower-interest credit card with CreditYelp. All you have to do is to follow these three steps: 

Pros of Using CreditYelp

• You have different credit card options to choose from.

• Each of these card issuers offers a lower interest rate. 

• Our credit card partners don’t charge an annual fee. 

• You get credit cards with excellent rewards/perks for miles, points, and cash back. 

• Every credit card issuer we recommend would have an irresistible intro/welcome offer.

• You have access to a higher credit limit.  

Except For a Credit Card, What Are the Alternatives to Buying a Car 

If you don’t have the means to pay off your credit card balance on time, buying a car with a credit card is not a good idea. There are other alternatives to consider.

Get an Auto Loan

Auto loans allow you to borrow money to buy a car or truck. There are simple interest loans you can pay back within 3 to 5 years, depending on your agreement with the lender. 

It’s better and makes more financial sense to buy a car with an auto loan. That is because the repayment period is relatively long and gives you less financial burden. You also pay a very low-interest loan (5.67% US national average) or less. You can get a lower-interest auto loan with CreditYelp. 

CreditYelp is a client-centered online loan broker that helps you get tailor-made loans to ease your current financial situation. We help our clients find, compare, and evaluate different loan options and help them make informed decisions based on their economic reality. 

Steps to Get an Auto Loan Through CreditYelp

1. Filled Out a Form. Filling out a form is the first step. Afterwhich, we will send your request to our loan partners. 
2. Accept Your Offer. On seeing your loan request, several lends will send you a customized offer. So, you have the option to compare and evaluate their offers and make an informed decision. 
3. Get Your Money. As soon as you choose the lender with the affordable interest rate, the requested funds will be deposited into your account almost as soon as the next business day. 

Pros of CreditYelp

Here are some of the reasons why you should consider using CreditYelp:

• CreditYelp helps you get a loan even though you have a bad credit score or low income. 

• CreditYelp has partnered with over ten reputable and legit lenders with NMLS license numbers.

• You can get a loan of up to $35,000.

• You get a more competitive interest rate on an auto loan.

• With CreditYelp, you can enjoy a higher loan approval rate. 

• You get the requested loan amount as soon as the next business day.

• Faster loan process due to the excellent relationship with our partner lenders. 

Find a Co-Signer 

A co-signer takes responsibility for paying back the loan alongside you. They could be a family member or close friend. They are obligated to pay any missed payments and the full loan amount if you don’t pay.

With a co-signer, you can get a lower interest rate and monthly repayment on a car loan. So, if you don’t have enough income to secure a loan, your credit score is terrible, or you have too much debt, you should consider finding a co-signer. 

Do a Trade-In 

Trade-in is another good way to finance the purchase of a new car. It’s an agreement between you and the auto dealer to buy a new car at a reduced price by giving your old one and money in payment.

Use Cash 

You can plan your income and save towards getting a nice car. It may take a while, but it is worth it in the long run. It’s never a good idea to use a cash advance (a short-term loan from banks or other lenders) to buy a car. It could hurt your financial health and credit history. 

FAQS

Is It Possible to Pay For a Car Down Payment With a Credit Card?

Yes, many dealers accept car down payments on a credit card. But it’s usually up to the dealer's description. So, it’s advisable to call your car dealer ahead of time to know their credit card payment options policy. However, remember that using a credit card for a large transaction could use up much of your available credit limit. 

What’s the Best Credit Card for Buying a Car?

Here are some of the best credit cards for buying a car:

The Business Platinum Card From American Express. This is a good credit card for buying a car. You have to pay an annual fee of $695. And when you spend $15,000 for the first three months of membership, you get 150,000 membership reward points. 

The Blue Business Plus Credit Card from American Express. This credit card doesn’t charge an annual fee. You can earn up to 15000 points when you spend $3,000 in eligible purchases in the first three months. 

Chase Freedom Unlimited. Chase freedom unlimited credit card is one of the best for buying a car. They don’t charge an annual fee, and you get up to 1.5% cash back on everything you buy up to $20,000 during your first year as a signup bonus. You also earn 1.5% back on all non-bonus purchases.