Most auto dealerships won't allow you to buy a car with a credit card, regardless of your credit situation. Even among the small number of dealerships who'll let you pay with plastic, they often only allow you to put a small portion of the purchase on your credit card.
Buying a Car with a Credit Card
Dealerships typically won’t let buyers pay for a car with a credit card. Even when a dealership does allow it, they usually don't accept credit cards for an entire purchase. Instead, they often limit the amount you can charge to a small portion of the purchase, typically $5,000 at the most.
There's one big reason why this is the case: credit card companies usually charge merchants a transaction fee, typically around one to four percent. When dealers allow buyers to pay with plastic, it results in them having to pay these fees, which cuts into their bottom line.
Not only will it be hard to find a dealership that'll let you buy a car with a credit card, it's likely not a smart thing to do money-wise. On average, credit cards have higher interest rates than auto loans, so you could be costing yourself money. If you’re dealing with poor credit, the last thing you need is credit card debt that can rack up high interest charges.
Downsides of Buying a Vehicle with a Credit Card
Consider these three downsides to buying all or part of a car purchase with a credit card:
- Hurts Credit Utilization Ratio and Credit Score: Even charging part of a vehicle purchase to a credit card could cause your credit utilization ratio to skyrocket. Credit utilization is the amount of your credit card balances compared to their limits, and having a high ratio hurts your credit score.
- Credit Card Interest Rates are Higher: Regardless of your credit, the interest rate you can get on a credit card is usually higher than it is for a car loan. Paying with plastic, therefore, can cost you more than financing it. There's usually not a good reason to do this, unless you have the cash to pay for the car on hand and are just trying to access credit card rewards, or you have a zero percent APR period on your credit card and can pay off the balance before it ends.
- Trouble When the Worst Occurs: If you buy with a credit card and your car is totaled in an accident or stolen, you'll likely be on the hook for more money than it's worth. When this happens, your insurance company covers what the car is worth at that time, which could be less than what you charged to your credit card due to depreciation.
The Bottom Line
Buying a car with a credit card usually isn't possible at most dealerships. Even when you can, you likely won't be able to charge the entire car purchase, and that's typically not a smart financial move anyway.
If you have bad credit, you're better off pursuing an auto loan from a special finance dealership. You can get back on the road and rebuild your credit through on-time loan payments. If you want to find financing, Auto Credit Express is here to help.
Our free service connects car buyers to local dealerships that know how to handle many different types of credit situations. Get the process started by submitting our secure car loan request form today.