Can You Buy a Car With a Credit Card?

According to recent data, the average cost of a used car in the US is around $23,000 to $28,000, making it difficult for most people to afford a car, let alone a new one. As a result, most interested buyers look into other ways to help finance their vehicle, including paying for the car with a credit card.

But is this doable, and if so, how does it work? We’ve detailed everything you need know about it in this guide.

Is It Possible to Buy a Used Car With a Credit Card?

Short answer: Yes, you can buy a car with a credit card. The longer answer depends on the dealership, your credit card company, and your financial situation.

Most dealerships accept credit cards for certain transactions. However, many will not allow you to put the entire purchase price of a vehicle on a card.

The reason for this is that dealerships are trying to avoid processing fees, which credit card companies usually charge merchants. These fees can be anywhere from 1.5% to 3.5% per transaction, which can cost dealerships up to thousands of dollars.

For example, if you were to purchase a $30,000 used car with a credit card charging 2.5% in processing fees, the dealership needs to pay $750 just to process that transaction. On higher-priced vehicles, those fees can quickly add up, which is why many dealerships either cap how much you can put on a credit card or avoid full credit card payments altogether.

How Much of the Cost of the Car Can You Put on a Credit Card?

Since dealerships limit how much of the car you can charge to your credit card, some alternative options include:

• Charging a portion of the overall price of the car in question.
• Using your credit card to pay for the down payment only.
• Using your credit card to pay for additional charges such as service fees, documentation fees, or accessories.

Please keep in mind that some dealerships cap the amount you charge to the credit card, for example, between $2,000 to $3,000.

Should You Buy a Car With a Credit Card?

The important question you should ask yourself is not whether you can buy a car with a credit card, but whether you should buy a car with a credit card.

When It Can Make Sense

Buying a car with a credit card may be reasonable if:

• You can pay the balance in full immediately. For example, you find a used car for $18,000 and put $3,000 on your credit card. If you pay off the $3,000 as soon as the charge posts, you avoid interest entirely while still getting the convenience of using your card.
• You are using a 0 percent intro APR card and will pay it off before the promotion ends. For example, you put $5,000 of a used car purchase on a credit card with a 12-month 0 percent introductory APR. If you pay about $420 per month, the balance is paid off before the promotional period ends, allowing you to spread out the cost without paying interest.
• You are earning valuable rewards or a welcome bonus. For example, your credit card offers a $500 welcome bonus if you spend $4,000 within the first three months. Using your card for a $4,000 down payment on a used car helps you meet that requirement quickly, essentially earning cash back or travel rewards from a purchase you were already planning to make.

When It’s Not a Good Idea

Using a credit card becomes expensive if you carry a balance. Credit card interest rates are typically over 20%. By comparison, average used car loan rates are much lower.

For example, putting $25,000 on a credit card at 20% interest and paying $1,000 per month could cost about $7,000 in interest. Lower monthly payments could stretch repayment for years and dramatically increase the total cost.

Another potential risk is that some dealerships may pass credit card processing fees on to the buyer, depending on state laws. Pair this with the additional fees you have to pay, and it makes an already expensive purchase even harder to manage.

How Does Buying a Car With a Credit Card Affect Your Credit Score?

Putting a large purchase on a credit card can temporarily lower your credit score because it uses up a big portion of your available credit. This drop is usually short-term, especially if you pay the balance off before the statement closes. However, it can still matter if you plan to apply for another loan or credit card soon.

See here for more information on whether you can buy a card with a bad credit score.

Alternatives to Buying a Used Car With a Credit Card

If paying with a credit card does not make sense, you still have solid financing options:

• Traditional auto loans from banks or credit unions
• Dealer financing, which may include incentives
• Leasing, if lower monthly payments are a priority
• Paying cash, if feasible

Using online marketplaces like Autostoday can help you find used cars at more affordable prices, making it easier to use your credit card in a smarter, more manageable way.