Purchasing a vehicle is a significant undertaking that comes with a lot of moving parts. While searching for the best deal on your desired car, your down payment, monthly payments, and other associated fees are likely top of mind. A question that may naturally arise is "Can I buy a car with a credit card?"
While the quick and general answer to this is yes, there are many outside factors that may influence or negate this possibility and are worth further consideration. These factors include things like your dealer's credit card policies, your auto lender's credit card policies, and your credit limit and financial standing.
At the same time, you should also consider whether putting your car down payment on your credit card or purchasing a vehicle outright on a credit card is a sensible move for you financially. For most people, it is not an option.
For these reasons, it is not recommended to buy a car with a credit card.
Do car dealers accept credit cards?
Whether or not you can purchase a vehicle with a credit card will depend on the dealer and the policies they have in place for certain transactions. Many dealers refuse credit card transactions or limit the dollar amount of such transactions due to the hefty transaction fees that often accompany them. Transaction fees are costs that merchants incur when they offer credit card payment options and typically cost the merchant somewhere between 1% and 3% of the purchase total. With car dealerships, a 1% to 3% charge on the price of a vehicle equates to a very large fee.
Car dealers and auto lenders that do accept credit cards as a form of payment may also charge a convenience fee. This fee is often designed to cover the transaction fee mentioned above and can range from 2% to 4%. You should take this into consideration if you decide to purchase a car with your credit card.
If the dealer's or lender's policy allows, you may still encounter some external obstacles that you want to be prepared for. For starters, it is a good idea to double-check your available credit limit to make sure you can cover the entire cost at the time of purchase. Additionally, your credit card issuer may block the transaction as a protective measure unless you first consult with them about your plans for making such a large purchase.
Can you use a credit card for a car down payment?
Putting a car down payment on a credit card is an option that many dealers are open to. Dealers may be more willing to allow this type of payment for the total amount, or a partial amount, of your car's down payment.
However, this option is solely up to the dealer's/lender’s discretion, so contact them to find out what their policy looks like when it comes to credit card payment options. Even if they allow it, this is not recommended because such a large transaction may use up much of your available credit, and if you carry a balance, especially a large one, you may face hefty interest charges.
Similarly, you may be wondering whether you can pay your monthly car payments on your credit card. Most lenders will not accept this form of payment, since a transaction fee may get tacked on to each month's payment, costing the lender money each month. If a lender does provide this option, you may face a further convenience fee imposed by the lender in order to cover their additional costs.
Should you buy a car with a credit card?
If you are being charged a convenience fee to offset the merchant's transaction costs, this additional cost may negate the benefits of using your credit card. Additionally, if you are not financially able to pay off the charges on your credit card each month, you might also end up spending more money overall, as interest accrues over time.
Further, your credit may take a hit; large purchases made on your credit card may impact your credit utilization ratio, which is the percentage of your credit limit that is currently in use. Since this credit utilization ratio accounts for a portion of your credit score, a large purchase may create a temporary dip in your credit report.
Ready for a new vehicle?
If you're ready to buy a new car, it pays to do your research in advance. You should also try out our auto loan and payment calculator to explore potential rates and monthly payments that you might expect from a new car purchase, all before ever closing on a deal.