The idea of buying a car with a credit card can make sense — it’s simple, it can streamline the car-buying process, and you can potentially earn a ton of points — but it could also be a terrible idea.
Considering how much your credit and finances could be impacted, buying a car with a credit card shouldn’t be something you do on a whim. Instead, there are a handful of things that need to be aligned in order for it to even be a worthy option.
Just because you can buy a car with a credit card doesn’t mean you should, so let’s see when it does and doesn’t make the most sense.
Can you really use a credit card to buy a car?
Yes, it’s possible to use a credit card to buy a car; however, you need a willing dealer and, depending on the amount you plan to charge, a credit limit with enough buying power. It’s not unheard of to use a credit card for some of the costs associated with buying a car — just maybe not the entire purchase price.
“In many dealerships, you can use a credit card for portions of the sale, down payments, and add-ons,” says Laura Gonzalez, the Marketing Manager at Audi Spokane. “I personally have never seen or heard of someone putting an entire purchase amount on a credit card.”
While putting a portion of the sale on a credit card typically isn’t always an issue, charging the entire amount might leave a bad taste in some dealers’ mouths.
“Dealerships are leery about putting payments on credit cards due to the risk of default being higher compared to an average car loan,” Gonzalez says.
Why a car dealer may or may not let you use a credit card
Dealers also want to make sure they’re getting a good deal on their end. Check out these pros and cons for why a dealer may or may not accept a credit credit for the purchase of a vehicle.
- Closing a sale: Let’s be honest; one of the only reasons a car dealer would let you use a credit card would be to get the sale and not lose a potential customer.
- Credit card transaction fees: Just like any other business, car dealers must pay a credit card processing fee of anywhere between 1.5% to 3.5% of the amount charged.
- Disputing the charge: Chase and Capital One note that customers can dispute a charge if they’re “dissatisfied” with their purchase. Whether or not the dispute is approved, it may not be worth the hassle for the car dealer.
- Losing out on financing opportunities: According to the National Automobile Dealers Association (NADA), roughly 85% of new vehicles and 54% of used vehicles had financing in 2018. Losing this opportunity means dealerships lose money.
If a car dealer is on board with you using a credit card, you may see some limitations on the sale. This could mean the transaction fee is pushed onto you or a cap is placed on the amount you can charge.
Conversely, you’ll find that some dealers are openly on board with the idea of buying a car with a credit card. American Express, for instance, offers cardmembers a car-buying program that connects prospective buyers with over 10,000 dealers who have agreed to accept American Express as payment. All participating dealers will accept the American Express card for at least $2,000 and possibly up to the full purchase price.
When it might be a good idea to buy a car using a credit card
Assuming you’ve found a participating dealer, there are a few instances when it may actually be beneficial to buy a car with a credit card.
You can pay off the amount you’re charging
If you have the cash available to pay your balance in full, you could just buy the car with cash. But why miss out on all those credit card rewards? Use your credit card, pay the balance immediately, avoid interest, and earn a decent amount of rewards in the process.
You’re utilizing a 0% APR offer
Many credit cards offer periods between 12 and 15 months of 0% interest, and taking advantage of this to buy a car could be one of your best options for financing part or all of your new automobile.
If the card you want to use for the purchase doesn’t provide this, a credit card that offers a 0% intro APR, or annual percentage rate, on balance transfers could be another option. Make the purchase on the card you want to earn rewards on and then transfer the amount to a card with a balance transfer offer.
You’re making more in rewards than what it costs
If you’re only earning 1% cash back, putting a $10,000 car on your credit card will only yield you $100. If the fees associated with this transaction are higher, it doesn’t make sense.
But if you apply for a card with a generous welcome offer, the math may work in your favor. You could purchase the car to meet the minimum-spend requirement for the bonus and earn a hefty amount of rewards on the purchase itself.
The best credit cards to use for buying a car
If everything is aligned and you’ve decided to charge your way to a new car, here are some top choices for credit cards that will provide the most value:
The Platinum Card from American Express
The Platinum Card from American Express is designed for large purchases, making it an ideal card for buying a car. There is no predefined spending capacity because, except for certain charges, most balances must be paid in full at the end of every month.
What makes the Platinum Card especially ideal for car buying is American Express’ vehicle-purchasing program mentioned earlier, which allows cardmembers to find the best car and charge at least $2,000 toward it on an American Express card. You might even be able to charge the full amount.
Earn 75,000 Membership Rewards points after spending $5,000 in the first 6 months, plus 10X points on purchases at U.S. gas stations and U.S. supermarkets for first 6 months (on up to $15,000 combined) — which the amount you put toward your car may cover by itself. This is on top of the 1X points per dollar you’ll earn on the car purchase.
Since the Platinum Card is a premium card with luxury travel benefits, such as Uber credits and access to more than 1,200 airport lounges, it does come with an annual fee of $550 (See rates and fees), so unless you can maximize the travel benefits, it may not make the most sense.
The Business Platinum Card from American Express
The Business Platinum Card from American Express could be another great option for buying a car if you’re a business owner, and it comes with a few different business-specific perks than the consumer card mentioned above. In addition to the Amex car-buying program, cardmembers can earn 5X points on flights and prepaid hotels on Amextravel.com, 1.5X points on eligible purchases of $5,000 or more, and 1X points per $1 spent on other purchases. Earn 100,000 Membership Rewards points after you spend $15,000 on purchases within the first 3 months.
The Business Platinum Card from American Express comes with a hefty annual fee of $595 (See rates and fees), but like the consumer card, it also comes with a handful of valuable benefits that can help offset this cost.
Chase Freedom Unlimited
If you’re not looking to take on an annual fee just to buy a car, the Chase Freedom Unlimited might be a great option. You can earn 1.5% cash back on the purchase of your vehicle, which isn’t the highest earnings rate possible, but it’s still higher than the 1X earnings you see on many cards.
Additionally, as a new cardmember, you can earn a $200 cash back bonus after spending $500 in the first 3 months. So, as a new cardmember, buying a car for $20,000 within the first three months of opening the card would earn you a total of $450 cash back — $300 from the 1.5% rate and $200 cash back from the bonus offer.
Additionally, if you have also have the Chase Sapphire Preferred Card, you can transfer your rewards from your Chase Freedom Unlimited, which are valued at one cent each, and redeem them for a higher 1.25 cents when you book travel through Chase Ultimate Rewards.
Couple all of that with the Chase Freedom Unlimited’s 0% introductory APR for 12 months and this just may be a car buyer’s dream card. If you’re able to pay off your car before the 12 months is up, you’ll have found a great way to finance a car while getting a decent amount of cash back in the process.
An automaker credit card could be a good option to save for a car
You may not hear about them too often, but there are several automaker credit cards out there that focus on earning rewards for the future purchase of a vehicle. Whether it’s your best option depends on your spending habits and if there are other comparable cards that can provide more value.
This list is not exhaustive, but here are a few automaker credit cards and what they offer:
- Earn 5% on your first $5,000 in purchases every year, then an unlimited 2%
- No annual fee
- 0% intro APR on purchases for the first 12 months
- No foreign transaction fee
- No limits on how much you earn or how much you redeem, and earnings never expire
- All GM dealers participate — that’s Chevrolet, Buick, GMC (General Motors Company), and Cadillac
- Redeem toward the purchase or lease of a new vehicle
- Earn 5,000 bonus points after spending $500 outside of Toyota dealerships within the first 90 days
- Five points per dollar spent at Toyota dealerships
- Two points per dollar spent on gas, dining, and entertainment
- One point per dollar spent on everything else
- Redeem for Toyota vehicle purchase, service, parts, accessories, cash back, gift cards, and travel
- Earn five points per dollar spent at Infiniti or Nissan retailers
- Five points per dollar spent on gas
- Three points per dollar spent on dining
- One point per dollar on everything else
- Redeem toward a vehicle purchase or lease, cashback statement credits, services, and accessories
FCA DrivePlus Mastercard (Fiat Chrysler Automobiles)
- Receive a $1,000 bonus certificate toward your next new FCA U.S. vehicle after spending $7,500 in your first year
- $100 cash back statement credit after spending $100 in FCA US purchases in your first billing cycle
- 0% intro APR for six billing cycles
- No annual fee
- 5% cash back at the dealership
- 2% cash back on gas and travel
- 1% cash back on everything else
- Redeem for vehicle purchases, services, accessories, cash back, travel, and gift cards
Getting a manufacturer-branded card will restrict you to buying a car within that brand, so if you aren’t sure what your next car will be, you may want to go with a general credit card that will allow you to purchase anywhere.
Things to keep in mind before you buy a car with a credit card
Since buying a car with a credit card is, well, not something you do every day, there are things you should consider before jumping in with both feet. Assuming you found a dealer who’s willing to accept a credit card as a method of payment, ask yourself the following questions to decide if it makes the most sense for you:
Will you be able to pay off the amount? If not, will the APR cost you more than you earn in rewards?
In a perfect world, you’ll either have a credit card with a 0% introductory APR or have the cash to immediately pay off the charge. If you can’t swing either and your credit card’s APR is higher than what you could have gotten through traditional auto financing, you may find yourself in a situation where the cost outweighs the benefits. Earning rewards is great — but not if it’s going to set you back with high interest payments and a large amount of debt.
Are you so focused on rewards that you are passing up a good APR from the dealer?
Buying a new car can be exciting, not to mention the number of points you can earn if you can use one of the best rewards credit cards to pay for it. Setting your sights solely on rewards, however, might force you to look past more-beneficial options.
If you’re able to secure traditional financing with a good APR and you don’t plan on paying the balance in full if you put it on your credit card, the rewards you’ll earn probably won’t be enough to justify using your credit card. Make sure to run the numbers so you’re getting the most bang for your buck.
How will the increase in credit utilization impact your credit score and other goals?
You’re probably aware that having too high of credit utilization can negatively impact your credit score, so where would the purchase of a vehicle land you? Even if you can take advantage of a 0% introductory APR offer, a large purchase like a car may leave your credit utilization higher than you want, which will drag your credit score down.
The bottom line on using a credit card to buy a car
Using a rewards credit card to buy a car can be a great way to earn points, but remember to still follow healthy finance habits — going into debt or damaging your credit score is probably not worth the points.
And just like any time you buy a car, it’s always a good idea to take a step back and view the situation from afar to ensure you’re getting the best deal possible.
If a salesperson is way too eager to get rid of a car, even with you using a credit card, you might wonder what’s wrong with it. Are they adding fees for using a credit card you otherwise wouldn’t pay? Did they raise the asking price after mentioning that you want to use a credit card? These are all important questions to ask so you don’t end up with a sour deal.
Car salespeople may also not be so willing to sell to you or make a deal on the price if they know upfront that you plan on paying with a credit card. It may be worth showing you’re a serious customer and to negotiate before pulling out your credit card to seal the deal.