Can You Buy a Car With a Credit Card?

Yes, you can buy a car using a credit card, but it’s important to understand how this works. When you charge the full price of the car to your credit card, you’ll need to repay the balance over time, with interest accumulating on any unpaid amount. Credit card companies impose fees that can affect the ability to purchase a car with a credit card, making this option less favorable for dealerships. Unlike car loans, credit cards don’t have fixed monthly payments, which gives you some flexibility. You only need to meet the minimum payment each month, but paying more will reduce your interest costs.

Before considering this option, you’ll need a strong credit score and a card with a high limit. Not all dealerships allow large transactions by credit card, so it’s worth confirming this with the seller. Some card issuers also place limits on single transactions, often around £5,000. Always review your card’s terms to avoid any unexpected restrictions or fees when making such a significant purchase. Additionally, ensure that your credit card limit is sufficient to handle the cost of the vehicle or at least a portion of it.

Can you pay your car loan with a credit card?

Yes, you can pay your car loan with a credit card, but it’s not always the best strategy. By using a money transfer from your credit card to cover the loan, you risk paying interest on both the loan and the credit card balance. This can make your debt more expensive over time, especially if you don’t manage your repayments carefully and end up accumulating credit card debt.

If you’re struggling with your loan payments, this option might seem appealing as it offers temporary relief. However, you’ll need to be cautious about how you use this additional credit, as it can lead to higher costs. Ideally, look for a credit card with a 0% interest offer on money transfers, but these are usually available only if you have a good credit score.

Make sure you keep up with at least the minimum payments each month to avoid penalties and fees. Once the 0% period ends, you might consider applying for another 0% card, but there’s no guarantee you’ll be approved. Overall, using a credit card to pay off a car loan is rarely ideal and should be reserved for times when other options are unavailable. If you haven’t bought the car yet, it’s better to avoid this approach entirely.

Do car dealerships accept credit cards?

In the United Kingdom, many car dealerships accept credit card payments, but it’s not a common choice for most buyers. In fact, only around one in 20 car purchases uses this method.

Using a credit card for part or full payment can offer benefits, especially if you have a 0% interest deal or can earn rewards like points or air miles. However, not all dealerships allow credit card payments for large amounts, and those that do may limit how much you can charge due to the credit card fees they incur. These fees can significantly impact the dealership's profits, influencing their decision to accept credit card payments. You might also face a processing fee of up to 3%, which could add to the cost.

To keep your options open, consider other financing solutions as well. Always check directly with the dealership to understand their payment terms and choose the best option for your situation.

Why should you pay for a car with a credit card?

Using a credit card to buy a car can be a smart option, especially if you can secure a 0% interest card. Ideally, apply for the longest 0% interest period available, whether it’s a purchase card or a money transfer card. You can then pay off the car in fixed monthly amounts without incurring interest, as long as you clear the balance before the 0% offer ends. However, if you do not pay off the full amount each month, you may have to pay interest on any outstanding balance, which could be higher compared to personal loans.

Another key benefit is the added protection you get when paying with a credit card. Under Section 75 of the Consumer Credit Act, you’re protected if something goes wrong with the car or dealership. This law allows you to claim a refund for purchases made between £100 and £30,000, giving you peace of mind if problems arise.

When should you use a credit card to purchase a car?

Using a credit card to buy a car can make sense when you’re purchasing a cheaper or used vehicle, especially if you have a 0% APR deal. This approach lets you spread the cost without paying interest, but only if you’re confident you can pay off the balance within the interest-free period. However, using a credit card might be more feasible for cheaper or used vehicles compared to new cars due to their higher price tags.

It’s important to avoid using a credit card if you’re likely to face standard APR rates, which are often higher than those offered by car loans. Before committing, compare all your options and ensure you can pay off the car within a reasonable time to avoid high interest charges.

Which factors should you check before purchasing a car using a credit card?

Depending on why you want to buy a car with a credit card, there are various factors to consider before doing so.

Ensure you can afford to pay the bill

While it might seem straightforward, many people charge a car to their credit card without a clear plan to manage the repayments. Credit card interest rates are often much higher than those offered by car loans, meaning the benefits of using a card, like points or rewards, can quickly be cancelled out by interest charges and credit card fees if not managed properly. If you’re unable to pay off the full balance right away, the high interest could make the purchase far more expensive than anticipated. Always make sure you can manage the payments before committing to this option.

Ensure that you have a large credit limit

To buy a car or make a large down payment using your credit card, you’ll need a high credit limit, and ensuring your credit limits are sufficient can be challenging. If your current limit isn’t enough, you can contact your bank or credit card provider to request an increase. If your account is in good standing, they may approve the higher limit, which gives you more flexibility for your purchase.

If you hold multiple cards from the same issuer, they might be able to transfer some of the credit limit from one card to another. This can help you reach the limit you need without applying for new credit. Always check with your provider to see what options are available.

Inform your credit card provider before buying

Whether you’re planning to buy a car outright or make a large down payment, it’s essential to inform your credit card provider first. Let them know you’re about to make a significant purchase so they don’t flag the transaction as suspicious. Without this notice, a charge of that size could trigger a fraud alert, causing delays in your purchase.

How to pay for a car with a credit card?

Using 0% rates

If you’ve secured a 0% interest credit card, set up a monthly direct debit to cover at least the minimum payment. For larger purchases like a car, calculate how much you need to repay each month to clear the balance before the 0% interest period ends. This way, you’ll avoid paying interest and can spread out the cost over time.

Money Transfer Cards

If your dealer doesn’t accept credit cards, a ‘money transfer’ card can still offer 0% interest. These cards work well for purchases under £5,000. Instead of paying the dealer directly, you transfer money from your new card to your bank account, and then use those funds to buy the car. Essentially, it’s an interest-free loan.

However, the downside of money transfer cards is that they don’t offer Section 75 protection, which leaves you without the security of a refund if something goes wrong with the car purchase.

Is it a good idea to use a credit card to pay for a car?

Using a credit card to buy a car comes with both advantages and disadvantages. Before making a decision, it’s essential to weigh up these factors and ensure you’ve done your research.

To get started, try our free car finance calculator and apply for a decision without affecting your credit score. We’re here to help you find the perfect financing for your next car.