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Can You Buy a Car with a Credit Card?

May 14, 2020 · 4 minute read

We’re here to help! First and foremost, SoFi Learn strives to be a beneficial resource to you as you navigate your financial journey. Read more We develop content that covers a variety of financial topics. Sometimes, that content may include information about products, features, or services that SoFi does not provide. We aim to break down complicated concepts, loop you in on the latest trends, and keep you up-to-date on the stuff you can use to help get your money right. Read less

Can You Buy a Car with a Credit Card?

Here’s the short answer. Yes, you can buy a car with a credit card. The better question may be whether or not this is the best way for you to purchase your vehicle—and this post will take you through the pros and cons of this method of car buying, as well as provide information about how this process may go.

The reality is that not all car-buying processes where the purchasers use credit cards are alike. So, we’ll show how some are more financially-savvy than others. We’ll also share the average car financing amounts and APRs today, along with average monthly car payments.

As with most situations involving money, what’s right for you isn’t necessarily right for someone else. Factors that help to determine the best financing strategy for you include how much ready cash you have in the bank and your credit score. Finally, we’ll also discuss other strategies for financing the car you want.

So, if you find yourself asking this question—Can I buy a car with a credit card?—then we recommend you read this post to explore your options and decide what’s best for your financial situation.

Pros of Car Buying With a Credit Card

Under certain circumstances, using a credit card to buy a vehicle can be an excellent strategy to consider—for example, when you have the money in the bank to pay off the balance in full when your statement comes.

In this scenario, you’ll have a fast and easy way to purchase your car of choice and, depending upon the credit card you’ll use, you may earn reward points, something you wouldn’t get if you simply used a cashier’s check to buy the car.

Here’s another way that strategy can work: If you have a credit card with a zero percent interest rate for a certain period of time. This strategy, though, isn’t as foolproof as the one where you pay the balance off in full, for more than one reason.

First, if, for some reason, you can’t pay the balance off within the introductory no interest period (emergencies do happen!), then the card will revert to its regular rate, which may be quite high.

If that happens, the situation can go downhill from there, because some credit card companies will then charge the full interest rate on the entire purchase, not just on the remaining balance. So, in that case, nothing was free and you’ll end up paying a high interest rate on the total balance.

Cons of Car Buying With a Credit Card

The biggest con of this strategy is that credit card interest rates are typically high, probably much higher than other available options. And, let’s say that your strategy is to purchase the car on your current credit cards, then transfer the balance to a zero interest credit card.

Besides the challenges listed above about these kinds of credit cards, there may be another one added to the picture if you transfer balances: transfer balance fees. These fees can be as high as 5% and, on a $20,000 car, that’s $1,000.

Here’s something else to consider. Having different kinds of debt can actually help with your credit score, so using an installment loan to buy your car may be helpful from a credit perspective.

Now, let’s return to the original question.

Can You Use a Credit Card to Buy a Car? Sometimes, Yes.

You’ll first need to check with your car dealership to verify that they accept credit card purchases. If they do, which ones do they accept? Some dealerships will allow a certain amount of the purchase, say $5,000, to put be on a credit card.

What’s most important is that you’re clear about what’s allowed; to save time, find out before you get too far along in the negotiating process.

If you go to a dealer that won’t accept credit card purchases, or limits the amount, you’ll have to decide whether to pay another way or to go to another place that sells the car you want and allows credit card purchases.

If you’ve selected a car at a place that takes credit card payments, you’ll need to check your credit limits to make sure you’ve got enough on one card or if you’ll need to use multiple ones.

If you still don’t have enough, you could pay the difference with a cashier’s check and still reap some of the reward-point benefits available through credit card use.

Or you could ask credit card companies for an increase in your limits. Note that, with the latter strategy, it can take a few days for the increased limit to take effect.

It also makes sense to notify your credit card companies that you intend to use your credit cards to make a large purchase. That’s because, if you don’t regularly make large purchases on your credit cards, the transaction might get flagged as potentially fraudulent and could get declined.

Car Financing Options

First, you’ll likely negotiate the price of the car, trying to get the best price possible. Then, if you don’t plan to simply pay the car off in full in cash, it’s now time to finance the vehicle.

You can, as discussed above, use credit cards to purchase a car if the dealer allows that method. You can apply for car loans through the dealership and through lenders that offer loans that use vehicles as collateral.

Note that, when you take out a loan using the vehicle as collateral, the lender has the option of repossessing that asset if payments are not made as agreed upon. This is a secured type of loan.

Dealers often offer loans on payment plans of 36, 48, or 60 months in length. They are often able to get financing approved that same day, while banks and private lenders may offer better deals, as far as interest rates and terms.

Saving For Your Car With SoFi Money

If buying a car is in your future, a good move may be to start saving in an account like SoFi Money®. SoFi Money is a cash management account where you can save, spend, and earn all in one place.

There are no account fees (subject to change), and you can easily create vaults within your SoFi Money account, each for its own purpose (like one for a car fund).

Get started with SoFi Money today to save for your dream car.

External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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