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Purchasing a car is a big commitment that comes with an even bigger price tag.
Depending on the car dealer and the cost of the car itself, you may be able to pay for this big-ticket purchase by simply swiping your credit card. But think twice before going full speed ahead.
Below, Select takes a look at what you should consider before buying a car with a credit card.
Consider the car dealership
Like all merchants that accept credit cards, car dealerships have to pay processing fees for every card transaction, so they have their own rules about whether or not you can pay using credit. Some may only allow you to charge a portion of the down payment, while others could allow you to fund the entire car cost on a credit card. If you are thinking about using your credit card, first negotiate the car price before telling the dealer your method of payment.
Consider your credit limit
A big factor when buying a car on a credit card is your credit limit. Unless you have a card that offers a high credit limit, like the Chase Sapphire Reserve® (see rates and fees), you probably won't be able to fund the full price of a car via credit card.
On the other hand, your card may come with a program especially for car-buying. Cardholders of the American Express Platinum Card® or any other type of Amex members, can try using the American Express Auto Purchasing Program, which connects you to dealers who accept American Express and let you charge $2,000 or more toward a car purchase on your Amex card.
If your credit limit is too low to buy a car, you could take steps in the meantime to build a stronger credit and increase it over time. You can also consider a traditional auto loan.
Consider using a card with a long 0% APR period
You might feel the temptation to buy your car with a rewards credit card so you can cash in on a big welcome bonus. But unless you have enough cash to pay your balance in full immediately after charging the car onto your credit card, you'll want to use a 0% purchase APR card instead. Cards with zero-interest financing give you time to pay off a new car without incurring additional charges.
The U.S. Bank Visa® Platinum Card is one of the best low interest cards with 0% introductory APR for the first 18 billing cycles on new purchases (then 18.24% - 29.24% variable APR). With a card like the Chase Freedom Unlimited® (see rates and fees), you get no interest on new purchases and balance transfers over the course of 15 months from account opening (then 18.24% - 27.74% variable APR; there's a intro balance transfer fee of $5 or 3% of the amount of each transfer, whichever is greater in the first 60 days. After that, the fee will be either $5 or 5% of the amount of each transfer, whichever is greater.)
To take full advantage of these savings over a year, we recommend that you make sure you can pay off the full balance of your new vehicle purchase before the 0% introductory period ends.
Consider using a card with big rewards
If you have the cash to buy your car in full, but want to take advantage of a cash-back or travel rewards bonus, using a top rewards card to buy your vehicle is certainly an option.
You could get instant cash back with a card like the Alliant Cashback Visa® Signature Credit Card with its 2.5% cash back on your first $10,000 of qualifying eligible purchases (1.5% for purchases over $10,000). (The Alliant Cashback Visa® Signature Card is no longer available to new applicants.)
Or easily hit the spending threshold to redeem rewards by using the Chase Sapphire Preferred® Card (see rates and fees). The card offers 75,000 bonus points after you spend $5,000 on purchases in the first 3 months from account opening.
And if you travel frequently, you may also want to consider using an airline or hotel card to pay for your new car.
New Delta SkyMiles® Platinum American Express Card members may be eligible for as high as 90,000 Bonus Miles after you spend $3,000 in eligible purchases on your new Card in your first 6 months of Card Membership.
For Hilton loyalists, a car purchase can quickly bring you to better rewards. The Hilton Honors American Express Aspire Card offers complimentary Hilton Honors™ Diamond status and a with no spending requirement needed. In addition, you can earn up to three Free Night Reward certificates per calendar year: one upon renewal, a second when you spend $30,000, and a third when you reach $60,000 in eligible purchases. Terms apply.
Bottom line
If you're in the market for a new car, consider the payment options your dealership offers; if they don't offer what you want, take the time to shop around. The decision to charge a new car purchase depends largely on whether or not you can pay the credit card balance off immediately, or if you have a plan to do so without earning interest. Granted you do, you can really reap a lot more value than just a new set of wheels.
Information about the Alliant Cashback Visa® Signature Credit Card and U.S. Bank Visa® Platinum Card has been collected independently by Select and has not been reviewed or provided by the issuer of the card prior to publication.
*Delta SkyMiles® Platinum American Express Card Welcome Offer: To view your personalized offer, you must first submit an application. If approved, you will: (1) receive your Welcome Offer details, (2) have the option to accept the Card with that offer, (3) be required to spend $3,000 on eligible purchases within the first 3 months of Card Membership, and (4) earn Membership Rewards® points. Welcome offers vary and you may not be eligible for an offer. If you're approved and accept your offer, a credit check may be conducted, which could impact your credit score. Terms apply.
For rates and fees of the American Express Platinum Card®, click here.
