How To Buy a Car With a Credit Card

Turbo Takeaways

Some dealers let you use a credit card for a car purchase, but often only for the down payment, not the full price.
Charging a large car purchase to a credit card can spike credit utilization and lower your score if you can't pay it off quickly.
Before using a card, compare dealer fees, any added convenience charges, and your card’s APR against an auto loan or other financing options.

Can You Buy a Car With a Credit Card?

Buying a car with a credit card depends on the dealer’s policies. Some allow it for the down payment, a capped portion of the purchase price, or, in rare cases, the full cost of the vehicle. Others don’t accept credit cards at all.

Dealers typically pay a credit card processing fee of around 1.5% to 4% per transaction. This means, for example, that for a $15,000 car, a 3% fee would cost the dealer about $450.

Because these fees add up quickly, many dealerships prefer other forms of payment, such as ACH transfers, cashier’s checks, personal checks, or money orders.

Cash is sometimes accepted, but due to money laundering regulations, many dealerships limit how much you can pay in cash or require additional paperwork for big cash transactions.

Is It a Good Idea To Buy a Car With a Credit Card?

Pros

Earn a big welcome bonus or valuable rewards
A 0% intro APR can provide short-term, interest-free financing
Stack rewards when you already have the cash to pay in full

Cons

Higher out-the-door price
Extra convenience fees
Can spike credit utilization and lead to costly interest charges

So, should you purchase a car with a credit card? It makes sense only under certain circumstances. In most cases, the costs and risks outweigh the benefits.

Buying a car with a credit card might be a good idea if:

You have a high credit limit and currently keep your credit utilization ratio low.
Your card offers a 0% introductory APR that lasts long enough to pay the balance off.
You’re confident you can pay the full balance before your credit card starts accruing interest.
You'll earn a large welcome bonus or enough extra reward points to offset interest charges and fees.

When the conditions are right, using a credit card for part of your car purchase can be a strategic move. However, if you’re unable to pay off your credit card balance, you’ll be subject to costly interest charges. This can quickly make your credit card debt unmanageable.

Keep in mind that the dealer may also impose a convenience fee of 2% to 3% to allow the purchaser to use a credit card, since it is a traditionally unconventional method of payment for an automobile.

How to Use a Credit Card to Buy a Car

After weighing the pros and cons, if you feel it is the right decision for you, here are 3 easy steps to use your credit card at the dealership.

1. Choose the Right Credit Card

Whether you want to use an existing rewards credit card or get a new credit card specifically for the purchase, the first thing you’ll need to do is to check with the credit card company if the purchase goes through. You’ll need to notify the issuer in advance, even if you have a high credit limit, to ensure the transaction doesn’t get flagged.

If you have good credit, choose a credit card issuer that has a large welcome bonus, no annual fee, 0% APR, or offers good rewards to offset the costs of making the large purchase. You’ll also have to ensure that the available credit limit is high enough, so the transaction doesn’t exceed your credit limit and cost you fees.

Shop around for the best credit cards and compare credit card interest rates before you pick one for car financing.

2. Negotiate With the Seller

This part may be a little challenging because most dealerships prefer borrowers to use alternative forms of payment rather than credit cards. You’ll need to find a dealership that accepts credit cards. Discuss your options with the salesperson.

3. Pay Off the Balance Quickly

You’ll need a plan to pay off your credit card debt as soon as possible to minimize your costs. If you’re using a 0% APR credit card, you’ll have to pay off your balance during that period to avoid interest charges. Calculate the monthly payment you’ll need to make to clear off your credit card balance to see if you can afford it.

If you feel you can afford to pay that much each month, it makes sense to reap the benefits of a credit card. If not, you’ll be left paying the high-interest standard APR on the remaining balance on the card until it’s paid off.

Alternatives to Using a Credit Card to Buy a Car

Paying for a car with a credit card is not the best choice unless you’re sure you can pay off the full balance before it is due. There are other options that offer lower interest charges and have fewer risks when compared to carrying high balances on your credit cards. Consider these alternatives instead.

Get a Car Loan

Apply for financing through the dealership or your own bank or credit union. Even if you have less-than-perfect credit, you may be able to qualify for bad credit car loans. Shop around to find the most competitive interest rates before you finalize a deal.

Apply With a Co-signer

Use a co-signer if you have poor credit. If you have a friend or family member who has better credit, you may be able to secure financing at a better rate. Family credit management techniques can also help improve your chances of attaining a vehicle.

Buy in Cash

If you can’t qualify for a car loan due to bad credit and do not have a co-signer, your best bet would be to pay for your purchase with cash. Purchase a cheaper used car instead of a new car that you can pay for in cash.

Trade-In Your Car

Make your next car cheaper by trading in your current car. Your trade-in may cover your down payment and reduce your expenses. Check the value of your car online and negotiate with the dealership to bring the price of the new car down when possible.

Use Auto-Branded Credit Cards

Auto-branded credit cards are offered by vehicle manufacturers that offer generous sign-up bonuses. You can accumulate points and then redeem them when you purchase a vehicle from that brand.

What to Do If Credit Card Car Costs Get Out of Hand

Buying a car with a credit card usually only makes sense in very specific cases. Unless you can use a 0% intro APR and pay the balance off fast, or you’re triggering a big welcome bonus with cash already set aside, the interest, fees, and credit score impact typically outweigh the rewards.

You’ll also need a concrete plan to pay down the balance quickly to keep interest charges from piling up. If you end up carrying a large balance on your card, that debt can become hard to manage very quickly.

If your credit card balance has already turned into unsustainable debt, TurboDebt® can help you explore options for unsecured debt relief and work toward a more stable financial situation.