Can I buy a car by paying with my credit card?

When teenagers, we talked about how cool it would be to have a credit card with a high limit, so high you could buy a car with it. I think we had talked about the platinum AmEx or the ‘black’ card.

So now, 20 years later, I have a credit card with high limit. It’s not enough to buy a car, but I could transfer funds from another account so that I have a positive balance on the card, and when I go to the dealership, there should be no problem making the purchase.

When I first thought about this recently, I chided myself that they aren’t going to be set up for that…how many people would do this? I then realized that they have service departments that regularly (predominantly?) use CC as payment.

So, never having tried this, can I buy a new car on my credit card? Will I get laughed out of the dealership, or simply asked to ‘sign here’?

I tried to buy a car with a credit card at a dealer in Boston and was told that they won’t do it. They would take a deposit (under $500) on a credit card, but wouldn’t allow me to charge the whole purchase price. I believe they have this policy so that they don’t have to pay the 1-3% fee to the credit card company.

I don’t know if this policy is in violation of the agreement they have with the credit card company. I know that most agreements state that the merchant must not have a minimum purchase amount; that is, they can’t refuse your card if you are spending only $1.00. I don’t know if they can set a maximum purchase price.

I don’t know if that would fly with a NEW car, and it would be incredibly stupid if you don’t have the cash on hand to pay the credit card debt off almost immediately (car loan interest in general being much lower). However, I have purchased a used car with a credit card- the dealer didn’t have any problem with it, but did mention that he didn’t have a machine and instead had to call the credit card in and use on of the old style machine that make a carbon copy of your card, because he didn’t do credit card business very often…

My guess is they’d swipe your card. If they get an approval, they’ll say “sign here.”

However, you’ll end up paying a lot more in interest on a credit card, than if you simply got a car loan.

Zev Steinhardt

I certainly won’t be leaving the balance on my card, which is why I mentioned loading up the card with a positive balance prior to the purchase (like the day before). One reason that I am considering doing this is for the affinity points…I’m going to spend the money anyway, why not get something extra out of it?

isthatsowrong?: I hadn’t considered that (which is why I’m asking in the first place). Perhaps I’ll check with the credit card company. Hmmm, what would the difference be if they made 1 transaction for $20K vs 20 $1K transactions? (thinking about the service department…)

I used to be friends with a new car salesman (which was cool because I got to test drive all kinds of cars). He said it wasn’t that unusual for people to buy cars with credit cards. Presumably they had the cash but wanted to get in on some incentive program from the credit card company.

I was in Las Vegas once with a high-rolling friend, and he bought a new Jeep with his American Express card.

It’s possible, in other words.

I partially bought a car with a credit card. About $1500 I think – the difference between the price and what I had in the bank.

But here is a way that you can buy a car with a credit card and pay less interest than a loan (well, except for the fact that so many are offering 0% financing these days) if you have the credit.

I get offers all the time from credit card companies for balance transfers with limited time low interest, anywhere from 0% to 3.9%. Sometimes these companies will send you a check if you ask for it. I usually take the check and get a CD ( a safe way to make a few hundred dollars on borrowing a few grand).

One company even offered 3.9% on a balance transfer forever. I stuck a significant chunk of my mortgage in that one.

Do not do this unless you religiously make your payments on time.

My folks did it. They had the cash on hand to buy the car outright but wanted the bonus of airmiles with their credit card. So, they made a payment on their credit card for something like $35000 (purchase price of the car) and then paid for it with the card. They got ooodles of airmiles out of it and the dealer was more than happy to co-operate.

So, just to echo what has already been said, yes it happens. Quite a bit from what I understand.

One catch, they may call the bank & ask the bank if you can charge that much & the bank may say no… happened to me once.

I just did it. I tried to get a loan at my credit union for a used car, but since it was a '95 ('96 is the cutoff), no auto loan. So I got a platinum visa from them and got a cash advance. The interest rate is 9.9, not great, but I’m paying off the car with next year’s tax refund, so I’m only out an extra 200 or so. No biggie, given the situation.

I did it. I bought an “Insurance Repairable” at a place called floyds, for just under 6k. I bought the parts to fix it up using the card as well. I jumped from 0% card to 0% card, and had it paid off in just over 2 years. One of my best purchases ever. I love my truck.

I used to work for American Express in the remit processing and account balance division and yes you can do this and it is not as uncommon as you would think.

Judging by the monthly spending habbits of a small % of our customers I can confidently say that some people have a LOT of money to burn.

The dealer can put a limit on the amount you can put on the credit card simply because he does not want to pay a high fee to the Credit Card company. Taking the deposit on the credit card is good business because it pretty much closes the purchase.

Look at it this way. The dealer tries to sell a lot of cars and make a profit at it. He knows his margins. Any fee paid to the credit card company is figured in the margin. If the dealer is allowing you to put the entire purchase on a credit card I can guarantee you that you can get a better price on the car if you agree NOT to charge it to the card. If he says “Sure, put it on the card.” you know that he’s made a deal with you that is highly in his favor and you’ve done a lousy job of negotiating. If you want to purchase airline tickets by overpaying on a car that’s one way of doing it. Everyone is trying to make money or save money. The more parties that are involved in the purchase, the more chance you have of getting beat out of your money by some party that is much more savvy.

At last, something I have firsthand experience with.

I did it. It was a used car, from a regular, official new car dealer. I handed them the card, they swiped it, transaction complete.

Four months later one of the Kunilou kids totaled the car, but that’s another story.

Don’t underestimate people. True, in some instances you are more likely than not correct. However in my case, the folks shopped around for weeks, they knew what a good deal was on the car. They negotiated the price and then asked for the credit card deal, which the dealer gave them. Yes, the dealer pays a percentage to the car co but it is better in the auto industry to make a smaller profit than give it all to someone else. Don’t automatically assume they’re getting screwed on the deal because they’re using a card, 'cause it just plain is not always the case. They are highly intelligent people and extremely shrewd when it comes to money.

Besides, don’t most credit card merchant agreements forbid charging a different price if someone uses their credit card for a purchase?

The merchant agreements forbid…

  1. different prices for checks vs credit card
  2. asking for state ID or driver’s licenses
  3. having a minimum amount for a credit card purchase.
    and probably a few other things.

Credit card companies do not tend to enforce the above too much, based on my observations of real-world merchant behavior.

I’m sure the people in your example got a comparatively good price on the car they were buying. However, everyone should get the idea out of their head that they are going to be such a tough negotiator that they are going to get the best of the dealer. The dealer knows exactly what his margins are (which include all kinds of things like factory give-backs) and what he needs to do to get the car off the lot. A poor selling model costs him money by sitting there, a good selling model commands the margin he wants because if he doesn’t get his price today, he’ll get it tomorrow. It’s all a balancing act.

One of the first things every dealer asks is “How are you going to pay for the car.” The answer determines his best price. His best price can and will be lower if he is doing the financing (he makes lots of money on the financing). Cash. or someone else doing the financing will get a better price than a credit card.

The rule of thumb is that every airline mile is worth $.02. If your example wants the airline miles then they can figure out how much that means as a discount on the purchase. In that case, whatever works for them may or may not be a good deal. If they made the deal with the dealer based on the understanding that it would be a cash deal and then they pulled out the credit card the dealer would probably invoke a limit as to how much could be charged.

The dealers know all the tricks. Try to get the best deal but forget about trying to get the best of them.

Been there, done that. Another advantage is that you only need to get liability insurance rather that the full coverage required if you got a car loan.

One difficulty I have had with my credit card is that I can only charge upto the amount of my limit in one hit. So if my limit is $12000 and I make a payment on my car to put it into credit by $8000 I can’t buy something worth $20000 I can still only charge a maximum of $12000.