Let’s face it, buying a car is a huge financial commitment that comes with a hefty price tag. Usually, they’re so costly that most consumers prefer getting loans to pay for their purchase over time. But some financially sound buyers pay for their vehicles using cash to own them instantly and avoid debts. Also, using cash is the best way to Buy A Car With No Credit Check. Recently, however, Carsplan readers have been asking, “can you buy a car with a credit card?”
The short answer is yes, although it’s as simple as it seems. Keep in mind it’s not all car dealers that accept credit cards. In fact, Buy Here Pay Here Cars are easier to purchase with a credit card than at major dealerships. Even so, there are a few things to consider when buying cars with credit cards. Here’s what you must know before purchasing a vehicle with a credit card.
Using Your Credit Card to Pay The Down Payment
Using your credit card to pay the deposit or the entire vehicle purchase is a great way to earn points loyalty points. However, a car is a major purchase. So, before adding a five-figure purchase to your plastic card, ensure you have the cash to pay off your credit card company in full. Else, you might pay more than average interest rates.
But you can avoid exorbitant APR if you open a card with a zero percent interest offer. You’ll still want to be sure that the 0% APR deal applies to new purchases. This is because most issuers apply up to 5% fees on balance transfers.
Putting money down on your vehicle purchase can go a long way to reduce your monthly payments. It is also an excellent way to secure lower interest rates on your car. You can pay part or the whole deposit with your credit card, depending on the dealership. Keep in mind that some dealers often restrict the amount you can pay with your plastic card. This is because card issuers apply merchant costs that add to the dealer’s costs.
Before using your card to rack up rewards on the car transaction, find out beforehand if the auto dealership allows credit card payments. It is will also help you find out about the restrictions they have. You shouldn’t expect to use your plastic card for the down payment if you want to buy a car from a private seller. When working directly with a financial institution, they are unlikely to sanction such a transaction.
When Should You Put Money Down With A Credit Card?
While you can pay the deposit using your credit card, it does not mean you should. Credit card down payments is not ideal in every situation. Overall, it’s best to put money down with your credit card under the following circumstances.
- If you will earn rewards for that transaction
- The card allows you to earn bonus points if you meet certain spending requirements
- If your card comes with a specific car-buying program
- If you have the funds to pay off the credit card transaction at the end of the month
Keep in mind that cashback rewards will be staggered into two transactions. Let’s say you are earning $100 back for a $4,000 deposit payable in eighteen months. You will receive $50 when making the purchase and $50 after clearing your bill.
Paying off the card balance outright is a good rule of thumb. Credit cards usually apply higher APRs than car loans. You might end up losing the value you had secured through loyalty points.
Using a card with an introductory zero-percent interest promo is a great way to make your down payment. Even in this case, you should have a solid financial plan for paying off the balance within the offer period. Otherwise, you could pay higher interest rates than if you had not used the credit card.
Can You Use A Credit Card For Regular Monthly Car Payments
The majority of auto lenders don’t support using credit cards to make your monthly payments. And if they do, they are likely to apply a convenience fee. This will overshadow any value of the cashback you would earn.
Note that some credit card companies may share a balance transfer check via mail. In that case, you could use it for car loan payments or clear it entirely. The check works similarly to a personal check only that it is linked to the limit on your credit card.
Also, you’ll want to remember that a 0% interest introductory offer does not exempt you from paying balance transfer fees. Most cards charge anywhere between 3% and 5% of the amount you are paying. You may still encounter the same issues with interest even if you’re using a credit card with 0% introductory APR. You’re likely to pay more once the promo ends if you haven’t cleared the payments.
Generally, it’s not advisable to use a credit card for monthly car payments. A balance transfer check is a viable option, especially if you are struggling with your car payments. But make sure to plan for how to clear the credit card debt before the end of the promotion to avoid exorbitant interest rates.
Can You Buy A Car With A Credit Card?
Yes. You can put the whole car purchase amount on your credit card. However, this will largely depend on the policy of the dealership and your credit limit. Furthermore, it may require authorization from your credit card company because of the size of the transaction.
But buying a car with a credit card is not for everyone. You should consider this kind of transaction only if you have a plan in place to pay off the credit card bill. If not, the credit card payments will charge higher interest than an auto loan.
Can A Credit Card Car Purchase Affect Your Credit Score?
It’s important to clear the entire credit card balance during the promotional period after the car purchase. It will go a long way to minimize the interest rate for the transactions. And even if you do that, the auto purchase can still affect your credit ratings, though temporarily.
We’ve already told you that a vehicle purchase is a major transaction. And with such a large purchase, it’s obvious that your credit utilization ratio will increase sharply. The ratio is determined by dividing the balance on your card by its credit limit.
The amount you owe on your credit card has a significant impact on calculating your FICO ratings. And the utilization ratio is a major component of the score. To avoid impacting your credit score, it’s recommended to keep your utilization ratio below 30 percent.
Credit card companies report your balance at the end of each billing cycle. Credit bureaus use this balance to determine your credit utilization ratio. Therefore, paying off the balance before the close of your monthly statement won’t have the purchase affecting your credit score. On the other hand, paying the balance in full after the monthly statement has closed won’t be good for your FICO score. It’s even worse to carry this balance through numerous months. It can lower your credit score significantly.
Also, it’s essential to check your FICO ratings before you consider buying a car with a credit card. This is a vital recommendation even if you don’t intend to make a down payment using your credit card. You can make better arrangements to finance your car by knowing where you stand.
Besides, if you have a less than average score and a car purchase isn’t a necessity, it’s a good idea to take time and improve your credit. It will come in handy when you want to apply for an auto loan. A successful vehicle loan can save you so much money in interest.
Top 10 Best Dealerships That Accept Credit Cards
Over the last few weeks, many of our readers have been asking, “Can you buy a car with a card?” Although it’s possible to pay for your vehicle purchase using a credit card, it’s not all car dealers that accept credit cards. To help you save resources and time, we’ve listed the top 10 best dealerships that accept credit card payments.
1. AutoNation Inc.
As one of the largest auto retailers in the nation, AutoNation has an entirely online purchase program. It means you can complete the whole car purchase process on the internet. And one of the perks that come with this package is the ability to use your credit card for the down payment.
This is after you successfully apply for credit with them. Once that’s done, you can arrange to pick-up the vehicle from the dealership or have it delivered to your home. Founded in 1996 in Fort Lauderdale Florida, the automotive retailer boasts over 360 dealerships across the country. Recording approximately 310,839 new and certified pre-owned car sales in 2018, it is arguably the biggest dealership in America.
2. Penske Automotive Group Inc.
Based in Bloomfield Hills, Michigan, Penske Automotive Group is a multi-national transportation services company. They run commercial trucks and automotive dealerships in many countries including the United States. The company’s Preferred Purchase program offers limitless possibilities. And one of them is buying your vehicle with a credit card.
You can shop for new and used cars plus commercial vehicles from their website or visit one of more than 150 Penske auto retailers across the country. They deal in over 35 vehicle brands with almost 30 thousand trucks, SUVs, and car models to choose from. With about 236,000 car sales in 2018, they’re undoubtedly one of the best places to purchase your next car with a credit card.
3. Lithia Motors Inc.
The Medford, Oregon-based nationwide auto retailer is touted as the third largest car dealership group in the U.S. Founded in 1946, Lithia Motors operates 202 dealerships countrywide. You can choose from one of 55 thousand models in their inventory and pay with your credit card. Dealing in new and used vehicles plus an in-house financing program, it’s no surprise they sold around 184,601 units in 2018.
4. Group 1 Automotive Inc.
Group 1 Automotive is another notable automotive retailer with over 100 locations across the United States. Apart from the U.S., the multi-national company operates over 200 franchises and collision centers in the U.K. and Brazil. While you can buy new and used cars plus light trucks with a credit card, there are other amazing offers to be had. They offer maintenance and repair services, auto financing, and vehicle parts for sale. It explains the resounding 170,517 automotive units they sold in 2018.
5. Sonic Automotive Inc.
What began as a small company in 1997 with about 20 stores and 15 vehicle brands has become one of the best auto retailers in America. With more than 100 locations in 14 states, Sonic Automotive deals in new and CPO cars, replacement components, as well as vehicle maintenance. Pick from one of the 25 different automobile brands they represent and get the convenience of paying for the purchase with a credit card. With about 122,717 vehicle sales in 2008, the Charlotte, NC-based company is ranked as the fifth larger auto dealership in America.
6. Hendrick Automotive Group
Also from Charlotte, NC, Hendrick Automotive Group is one of the best places you’ll want to visit to buy a car with a credit card. You can visit one of their 95 locations in 14 states and choose from their 27 automotive brands. Alternatively, you can visit the company’s website for a 100% online car-purchasing experience. Running over 130 franchises in the U.S., the company recorded about 111,845 vehicle sales in 2018.
7. Asbury Automotive Group Inc.
Founded in 1995 in Duluth, GA, Asbury is among the biggest auto retailers in the United States. Recording approximately 105,275 new and used vehicle sales in 2018, it is one of the top dealerships to purchase your car with a credit card. Available in 14 states through its 91 dealerships, the company offers a wide range of auto products and services for the 31 brands they represent.
8. Larry H. Miller Dealerships
If buying a car with a credit card is an absolute necessity, then consider visiting the Larry H. Miller Dealerships. Founded in 1979 and based in Sandy, Utah, it is ranked as the best Toyota dealer in America with 65 locations in seven states. Representing 19 automotive brands, the new and used car dealership sold about 68,548 vehicle units in 2018.
9. Ken Garff Automotive Group
Selling 63,606 vehicles in 2018 and 59,305 units in 2019, you cannot overlook Ken Garff Automotive in your quest for a car dealer that accepts credit cards. Ranked as the tenth-largest new and used auto retailer in the United States, you can arrange for financing, order vehicle parts, and schedule service through one of their 54 locations in the country. They also offer a 100% online-only car-purchase experience.
10. Staluppi Auto Group
With around 59,132 vehicle sales in 2018, Staluppi Auto Group is a nice place to buy your car with a credit card. As part of the Atlantic Auto Group Inc., they have nearly 30 locations in the U.S. In 2011, Staluppi was ranked as the eighth biggest auto retailer chain in terms of gross revenue. With a wide inventory of new and used cars, they offer limitless possibilities for the best car-buying experience.
Frequently Asked Questions (FAQ)
The best credit card for buying a car will depend on a few factors. It’s best to use a card that gives 0% introductory APR on purchases to minimize interest on that transaction. You’ll also want to get a card with minimum annual fees, for which other companies have no charges. A card that will earn rewards for the car purchase is also a great pick. Some cards will even go the extra mile to give you points if you meet some spending threshold. And the best credit cards for purchasing a vehicle should offer a specific car-buying program. But no matter your choice, you’ll still end up paying more than you would with an auto loan if you don’t have the funds to clear the credit card balance at the close of the month’s transaction.
Yes. You can pay your car’s deposit using a credit card. However, this will depend on the dealer’s policy. It’s important to note that auto dealers may restrict the amount you can pay with a credit card for the down payment. This is because credit card companies usually charge merchant fees on such transactions. As a result, dealers will limit how much you can deposit with your card to lower their costs. It means you can pay part of or the entire down payment using your credit card, depending on the dealer. Also, some dealers don’t accept credit card payments.
Yes. Many car dealerships accept credit cards. But each dealer has unique requirements before they let you pay for your car purchase with a card. Therefore, it makes sense to find out from the dealer before you visit so you’ll know what to expect.
Dealerships may not like it when paying for your car with cash. It’s obvious that dealerships make some profit on a car sale as well as the trade-in for those who have one. However, most car buyers don’t realize there’s a third way in which dealers make money when you buy a new vehicle. The majority of car dealerships make their most profit through auto financing. In this way, they can charge a loan mark-up that gives them the bulk of their profit. For instance, they can set you up with an auto loan from one of their financing partners at 7% interest, while the actual rate is 5%. It means there’s an additional 2% loan markup for their gain. That’s why you should never disclose to the salesperson that you intend to pay with cash until you finalize the deal.
The amount you should on a credit card for an auto purchase will depend on many factors. First, it will vary according to the dealer’s limit, if they have any. Also, it will depend on whether your credit card company allows such large transactions plus your credit card limit. The various factors notwithstanding, it is still best to stay under 25% of your credit limit. It means you should not charge more than 75% of your limit at once and you should pay off the balance before charging again. In this way, your car purchase will not affect your credit score in any way.
You now have the answers if you’ve been wondering, “can you buy a car with a credit card?” It’s possible to add the entire car purchase on your credit card with your issuer’s authorization. And it offers a great way to rack up large sums of miles, points, or cash back. Even so, it’s not all car dealers that accept credit cards. So, you must find a dealer that allows such transactions. Further still, you’ll want to avoid making regular monthly payments for your car using your credit card. Doing that can translate to higher-than-average interest rates, especially if you pay off the balance after your credit card’s grace period.
And whether you are making a down payment or paying the whole amount with your credit card, it’s best to have the cash on hand to clear the balance. If not, it would be in your best interest to consider an auto loan for the vehicle purchase. Delaying to pay your credit card balance can spike your interest higher than an auto loan would charge.