Secrets of Buying a Car with a Credit Card

Outside of purchasing a home, buying a car can be one expensive enterprise. Planning your budget…making sure you have enough for the down payment…let’s face it, a car is costly and has no financial upside. Unlike a house, most cars depreciate as soon as you start the ignition and drive off the lot.  

The money you spend on the down payment and monthly payments will not yield any financial return.  And while it appears that buying a car is an investment on the surface, it’s just a big purchase. That is unless you use a credit card. 

If you’ve ever thought about using your credit card to buy a car, the answer is yes, and you can use it to make your car payments too!  Big purchases like a new car is a great way to achieve the minimum spending requirement needed to receive rewards

Ready to go to the dealership? Well, before you dash out the door, here are a few things you should know:

  • Not every dealership allows you to use a credit card to pay for a car.
  • Depending on your credit limit and amount of the car, you may be able to use your credit card for the down payment or to pay for part of the car.
  • The dealer may charge you more to pay with the credit card.
  • Interest on your card will add up if you don’t pay off the balance.
  • Amex has a program that allows you to pay for a new or used car with your card.

When should you buy a car with a credit card?

The reason why some dealerships won’t allow you to pay with a credit card is because they will have to pay a credit card processing fee of 1% up to 4% depending on the card you’re using. This fee ultimately cuts into the profit they make for selling the car, so if the dollar amount of the processing fee cuts nearly half their profit, then it’s simply not advantageous for the dealer to have you whip out your plastic. 

Now, let’s say you’ve done your digging and found a dealership that allows you to use your credit card, speak with a dealer or finance manager to find out what you can pay on your card. Most dealerships will cap the amount spent on your card at $3000 to $5,000. There are the rare cases when a dealership will allow you to make the entire new car purchase on the card. Some dealerships or car sites, such as Car Max, charge a fee for a credit card purchase to offset the fees that they will pay for processing. 

Can you pay off the amount you’re charging? Remember the point of purchasing a car with a credit card is to take advantage of the rewards your credit card offers, not to assume more debt. If you have the cash available, use your credit card, then pay the balance immediately so you can avoid any interest fees and snag those rewards in the process. Also, carrying a balance could have a negative impact on your credit score, so it’s imperative that you pay the balance off as soon as possible.

The appeal of a 0% APR offer also presents another incentive to purchase a car with a credit card. Many credit cards offer periods between 12 and 15 months of 0% interest, giving you time to pay off the balance if you’re unable to pay the complete balance within the first 30 days of the purchase. 

What credit cards should you use?

So, you’ve found a dealership will allow you to use your credit card, and you have the money to pay the balance after the purchase has been completed. Which cards will give you the most rewards bang for your buck?

The Platinum Card from American Express

The Platinum Card from American Express was designed for larger purchases because it doesn’t have a preset spending limit. However, this doesn’t mean you have unlimited funds available. This card is also ideal when using American Express’ vehicle purchasing program. 

You can 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 the first six 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.

Another benefit the Platinum card offers is luxury travel benefits, such as Uber credits and access to more than 1,200 airport lounges. This card does have an annual fee of $550, which is something to consider if you’re not a big traveler.

The Business Platinum Card from American Express

The Business Platinum Card from American Express is another card to use when making big purchases like a car. Using this card can earn you 5X points on flights and prepaid hotels on, 1.5X points on eligible purchases of $5,000 or more, and 1X points per $1 spent on other purchases. Earn 85,000 Membership Rewards points after you spend $15,000 on purchases within the first 3 months. The card does have an annual fee of $595.

Chase Freedom Unlimited 

The Chase Freedom Unlimited card has no annual fee. This card earns you 1.5% cash back on your purchases, and, as a new cardmember, you can earn a $200 cash back bonus after spending $500 in the first three months.

Chase Freedom Unlimited has a generous introductory APR on purchases. You’ll have several months to pay off your car which is a great way to finance a car while receiving a good amount of cash back in the process.

Several automakers have credit cards that enable you to earn rewards for the future purchase of a car. Here are three to consider:

General Motors BuyPower Card

  • 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 earning limits and earnings never expire
  • All GM dealers participate 
  • Redeem toward the purchase or lease of a new vehicle

Toyota Rewards Visa

  • 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

Infiniti Visa Card

  • 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

So, there you have it. Purchase a car using a credit card? Absolutely! But only if the rewards are worth it and you can pay your balance in full once you’ve maximized the spending requirement. 




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