You’ve done your research, picked out your car, and you are ready to sign on the dotted line. But the question now is should you buy or lease, and if you do decide to purchase the car. How are you going to pay? Loan, cash, maybe with a credit card? Can you even purchase a car with a credit card? Read on to learn whether a credit card car purchase is possible and if so, is it a good idea?
Will auto dealerships accept a credit card as payment?
Not all dealers will accept a credit card for the full price of the car. The main reason is that most credit and debit purchases carry a transaction fee often between 1% and 3% of the total amount. This fee is paid by the merchant. This lowers the dealer’s margin.
Often times a dealership will allow a portion of the amount to be charged to the card. Usually a predetermined limit.
Is it a good idea to pay with a credit card?
Using a credit card to purchase a car can be good depending on the circumstances. If you are using the card to gain rewards on the purchase and know you can quickly pay off the balance, using the card could be good. But if you are planning on paying off the card slowly, be careful interest charges add up quickly.
Auto loan interest tends to be much lower that credit card interest, so unless you are using a very low or even 0% interest card, you are likely better off with a car loan. Many of these low or zero interest cards come with a short payoff period before the interest increases, usually to a much higher rate. If you do use one of these cards, make sure to pay off the balance before the cutoff period.