Some car dealerships may allow you to pay for part of your car purchase with a credit card.

Can You Buy a Car with a Credit Card

5 min read

Last Updated: November 12, 2024

Table of contents

Key Takeaways

Most car dealerships won’t allow you to pay for the entire price of a car on a credit card, but may allow you to pay for a down payment.
The benefits and risks of buying a car with your credit card depend on your credit utilization ratio, credit card interest charges, and the rewards potential.
If you pay for a car with your credit card, try to pay off the balance quickly to avoid hurting your credit score.

If you’re thinking about buying a car and are weighing your financial options, you may have wondered whether a credit card could be a possible payment method. Not everyone has the cash on hand to make such a large purchase. So, is buying a car with a credit card a good option for you?

Do car dealerships allow you to pay with credit cards?

A car dealership may allow you to use your credit card for a portion of your car purchase. However, you probably won’t be able to buy a car outright with a credit card.

The reason why is because the car dealer pays a credit card processing fee whenever they accept a credit card payment. This transaction fee is usually about 3% of the total transaction. It’s in the dealer’s best interest to avoid those fees by accepting other forms of payment, such as cash (or a debit card) or an auto loan. Otherwise, they may make you responsible for the processing fee by adding it to the total amount that you owe.

This means that if you want to put $10,000 towards your car on your credit card, the dealer will incur a $300 credit card fee for that transaction if their processing fee is 3%. If they decide to make it your responsibility, your total payment equals $10,300.

Can you use a credit card for a car down payment?

While you can’t typically pay for your entire car purchase with a credit card, you may be able to pay your down payment with credit. However, one car dealer may accept credit for the total down payment, while another may only let you pay up to a certain amount with your credit card. Each car dealership may have a different policy, and some may not accept a credit card payment at all.

Even if a dealership allows you to cover a down payment with credit, it’s not always the best option. A down payment may use a significant portion of your overall available credit. If you can’t repay your balance right away, your credit score could impacted.

What are the pros and cons of buying a car with a credit card?

If you’ve found a car dealership that accepts credit cards, you may also want to weigh the pros and cons of using credit for a down payment before swiping your card.

The pros of buying a car with a credit card

Credit card rewards: It’s tempting to use a rewards credit card on big purchases (like cars) to earn cash back or Miles. While you’ll earn rewards and other perks, you need to make sure you can pay off what you’ve spent quickly. Otherwise, you may have interest charges that outweigh any credit card reward you get.

Did you know?

With a Discover cash back credit card, you can get an unlimited dollar-for-dollar match of all the cash back you’ve earned at the end of your first year, automatically. There is no limit to how much we’ll match.¹

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Convenience: When you’re low on cash, the advantages of having credit cards are plenty. They provide a way to get funds quickly and conveniently. But this is only beneficial if you know you’ll have the cash to pay it back quickly.

The cons of buying a car with a credit card

High interest rate: Credit card interest rates are typically much higher than the interest rates on a car loan. With a large purchase like a car, you may not be able to pay off your credit card balance quickly and interest charges will begin to accrue. This can make your car purchase more expensive than necessary.

The exception to this is if you get a 0% intro APR credit card, which will allow you to make your credit card purchase free of interest during a promotional period. This means that you’ll have to pay the amount off quickly before the promotion ends to avoid paying the typical interest rate on the remaining balance. If you’re able to pay everything off before the period ends, you’ll have paid for a car with no interest.

High credit utilization: Another important factor to consider is the effect that making a vehicle purchase on your credit card could have on your credit score. If you’re able to pay off your credit card balance immediately after buying the car, it could display positive behavior in your payment history, and you wouldn’t have any interest charges. If you don’t pay the full balance of the credit card by the due date, you risk not only the remaining balance being subject to costly interest fees but also your credit utilization ratio going up.

What is a credit utilization ratio? Your credit utilization ratio is the amount of credit you’re using across all your credit cards compared to your credit limit across those cards. It’s good to keep this ratio as low as possible. If your balance is high compared to your credit limit, it will affect your credit report, and you may see a decline in your credit score.

What to consider when buying a car with a credit card

The outcome of buying a car with a credit card differs from one individual to another. If you’re looking to make a large purchase such as a new car, it’s important to know if the benefits outweigh the risks for you personally. If you’re confident that your credit limit will allow it, and you’re disciplined enough to put a car payment on your credit card, it may be worth it. Just make sure you have the cash to pay it back quickly and you can score some nice rewards.

If you don’t have the discipline to pay off your card quickly, it’s in your best interest not to use your credit card to pay for a car, even if your credit limit will allow it. The interest rate you’ll have to pay back on a credit card may be far higher than the interest rates that you’d have to pay for a loan. You’re better off using other financing options such as cash, an auto loan, or trading in a car for a down payment if you’re looking for financially responsible ways to buy a car.

Here are some other questions to consider:

A credit card typically has a higher interest rate than a car loan. So, you only want to buy a car with a credit card if you have a plan to pay it off quickly. For example, it may make sense to use your credit card to pay for a car if you have a 0% APR card and can pay everything off before the intro period ends. If you might struggle to afford a monthly payment, then you want to avoid accumulating credit card debt.

As with any large purchase, when you first buy a car, you may see a temporary dip in your credit scores because you’re taking out a hefty loan. But, with responsible habits, such as making on-time payments, your credit score should go back up. In fact, buying a car may help your credit if you make all your payments on time.

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