Can You Buy A Car With A Credit Card?

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  • Car processing fees
  • Convenience fees
  • Interest payments
  • Pros and cons
  • Loan comparison tool
  • Affordable insurance
  • FAQs
Most dealers don’t take credit cards. And if you find one that does, you might be hit with hefty fees to cover the dealer’s costs.
You swipe your credit card to buy a sweet ride, drive off the lot, and chase the sunset. While that is certainly possible, the reality is that the downsides of buying a car on a card might not be worth all of those Airmiles.
Lucky for you, the car insurance comparison shopping and broker app, Jerry has all the information you need to know about using a credit card to buy your next vehicle (or not).
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Car dealers and credit card processing fees

If you find a car dealer who accepts credit cards, odds are they will limit the amount of the down payment or the car’s purchase price you can put on the card. Why? Simple—accepting credit card payments costs dealers money.
Car dealers pay a processing fee when accepting payment via credit card, and this fee ranges between 1%-3% of the transaction.
For a $25,000 car, a dealer will pay a $500 fee to a credit card company for processing the payment. So, the more credit card payments a dealer accepts, the more transaction fees they have to pay.
In an industry known for slim margins, it isn’t surprising that most dealers don’t accept credit card payments.
Key takeaway Accepting credit card payments costs dealers money, so they make buyer pay a fee to make up the difference.

Prepare for convenience fees

Say you’ve found a dealer willing to accept credit card payments. Remember, they still have to pay that pesky processing fee. So, how do they offset this cost? You, that’s how!
In order to recoup money lost to a credit card transaction fee, a car dealer will charge the customer a “convenience fee,” to make this money back.
Car dealers, like other merchants who don’t usually accept credit card payments, are allowed to charge a 2%-4% convenience fee to cover their costs.
Cashback, miles, and other rewards programs that come with big credit card purchases are enticing. However, paying a dealer’s required convenience fees will most likely offset any potential rewards typically gained from high credit card spending.
Key takeaway A convenience fee will likely offset the value of credit card rewards.

Don’t forget about interest payments

Credit card interest rates are typically around 20%. Putting the car on the card might mean—in theory—that you can stretch those monthly car payments out. But remember— you’ll be on the hook for that high-interest rate the whole time.
Even buying a car on a new credit card featuring an extended 0% purchase APR period comes with pitfalls.
True, you’ll be paying no interest (including on the car) for the 12-15 months that your APR honeymoon lasts. But once it’s up, the interest rates return. If you haven’t paid off your purchases in full, you’ll be servicing the high-interest rate on your balance for the duration of your lease.
Key takeaways Most credit cards have an interest rate of 20% or more—while average car loan interest rate hovers around 5%.
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Pros and cons of buying a car with a card

Pros

Yes, there are some.
When you use a credit card to fully or partially purchase a car, your name goes on the title (not a lender’s).
Also, you may be able to earn credit card rewards, points, or miles by buying a car with a credit card. Remember though—dealer convenience fees may offset the value of those rewards.

Cons

Buying a car with a credit card can negatively affect your credit score.
How so? Credit utilization is the term used to describe the percentage of your credit limit in use. This accounts for roughly 30% of your credit score, and typically you want to keep your credit utilization at the same level or below so your credit doesn’t drop.
So, keep in mind—buying a used car on your credit card can max that card out. If you can’t pay your monthly balance off on time, your credit score will take a beating.
Also, high credit card high-interest rates make credit card vehicle shopping prohibitive for most. Try securing an auto loan or personal loan instead. Interest rates for these typically range from 4.99%-5.49%—much easier to handle for most car buyers.

Car loan comparison tool

Should you decide that a loan might be a safer plan than buying on credit, you deserve a loan package that works for your budget.
Let Jerry help you compare rates and find out how much you can save on your loan. As an AI-powered broker, Jerry gives you all of the savings and coverage with none of the hassle—and it’s totally free to use.

Getting affordable car insurance

Whether you buy a car with your credit card or not, you’ll still need car insurance. Jerry can find you great savings on car insurance with just a few taps on your smartphone. Get Jerry’s help finding the best insurance for your new ride.
If you’re shopping for car insurance, Jerry will generate competitive quotes from top providers in less than a minute.
Jerry gathers your information from your past insurer, so you’re not responsible for any long forms or phone calls. Basically, you get all of the savings and coverage, with none of the hassle.
The average Jerry driver saves $879 a year on car insurance. Oh, and we should mention—Jerry is 100% free!
“Jerry does all the work for you. They compare rates across all the major providers in seconds and automatically sorts the most convenient options for your budget! Give them a try!” — Satisfied Jerry Customer

FAQs

So, should I use my credit card to buy a car or not?

For most people, using a credit card to buy a car is not a good option. High credit card interest rates plus hefty dealer convenience fees make buying a car with a credit card a bad idea for most people.

What if I have a new credit card with an extended 0% interest period?

For some people this may work—just be sure you’ll be able to pay off the card’s balance in full before the 0% period ends. After that, interest rates will kick in!
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Sources Credit card interest rates and auto loan rates sourced from The Balance.

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