Quick Facts About Buying a Car With a Credit Card
- It’s more likely for a dealership to take a credit card for part of the down payment than for the entire purchase price.
- A dealership willing to accept a credit card for a large amount may make you pay the transaction processing fee, which might be 3% or more.
- Using a credit card to buy a car isn’t the best decision because annual percentage rates are more than 22%, so consider other options to avoid negative financial impact.
Most car shoppers finance their purchases with auto loans. Those same shoppers also have credit cards in their wallets, so why don’t they just use plastic to buy vehicles?
Read on to learn the ins and outs regarding whether you can buy a car with a credit card.
- Do Car Dealerships Accept Credit Cards?
- Can You Make a Car Payment With a Credit Card?
- Considerations When Using a Credit Card for a Car
- Options Other Than Buying With a Credit Card
Do Car Dealerships Accept Credit Cards?
In general, car dealerships accept credit cards. You might even be able to use a card to buy a vehicle. However, it’s more likely that the dealership will take a credit card for a down payment or a part of the down payment up to a certain amount.
For you, using a credit card is a convenience or maybe a necessity. While the dealership wants to make things easy for you, it’s doing business to make money. Accepting credit cards is an additional expense for the dealer because merchants must pay the credit card company a fee each time a customer swipes a card.
This fee can vary, but it’s typically 3% of the transaction. For minor purchases like $100 of accessories in the parts department, a $3 fee is considered a cost of doing business. However, it’s different when a customer wants to put a $5,000 down payment on a credit card. That’s real money to the dealer. Dealerships, like other merchants, might have policies prohibiting high-dollar credit card transactions.
If the dealership is willing to accept your credit card for larger amounts, it may pass along the transaction processing fee to you. So, your $5,000 down payment might cost you $5,150.
RELATED: How Much Money Should You Put Down on a Car?
Can You Make a Car Payment With a Credit Card?
Some lenders might let you use a credit card to make a car payment. However, using a card to make loan payments could cost you more money because of additional interest or transaction fees.
Do You Need a Credit Card to Buy a Car?
You don’t need to have a credit card to buy a car. However, you will need to have a good credit history for better interest rates if you finance your vehicle purchase.
Considerations When Using a Credit Card for a Car
Just because a dealer will let you use your credit card toward a vehicle purchase doesn’t mean you should. There may be situations when it makes good sense or is your only option. In most cases, buying a car with a credit card is not the best decision after weighing the benefits and disadvantages. Consider the pros and cons of using a credit card to buy a car.
Interest Rates
Credit cards have higher interest rates than loans. Federal Reserve data shows the average annual percentage rate (APR) for credit card accounts assessed interest was 23.37% in the third quarter of 2024, while the average interest rate from banks for 60-month new auto loans was 8.4%. According to data from Autotrader’s corporate parent, Cox Automotive, the average auto loan rate for used vehicles is 13.76%.
Of course, each bank, credit union, and finance company charges different rates for consumers. Borrowers with lower credit scores usually have higher interest rates on loans. Experts expect interest rates to decline in 2025. Still, the wide difference in interest rates shows that having a car loan will be cheaper than using a credit card and spreading out monthly payments.
Suppose you want to buy a daily driver for $10,000 to get you to work and back for the next couple of years. The chart below illustrates the cost difference between using a credit card versus an auto loan.
| Typical Credit Card Annual Percentage Rate (APR) | Typical Used Car Interest Rate | |
| Car price (loan amount) | $10,000 | $10,000 |
| Rate | 22% | 12% |
| Repayment months | 24 | 24 |
| Monthly payment | $519 | $471 |
| Total interest payments | $2,451 | $1,298 |
| Total cost | $12,451 | $11,298 |
0% Interest
At least one situation makes using a credit card to purchase all or part of a car beneficial. When possible, take advantage of a new card that offers 0% APR. If you’re able to pay the balance before the promotional period ends, you’re essentially paying no interest to finance a car. However, you must remember that you might be hit with an additional fee from the dealership to account for its card processing expense, which could be as high as 3% of the transaction amount.
Credit Limits and Negative Effects on Your Credit Score
If you decide to use a card or several credit cards to buy a vehicle, be sure to know the credit limit on the cards. Also, call the credit card company ahead of time to alert it of an upcoming high-dollar charge. This courtesy should prevent the bank’s fraud department from flagging the unusual transaction. While you’re on the phone, the representative can confirm how much spending is available.
You should be aware that a significant transaction can lower your credit score. The major credit bureaus — Equifax, Experian, and TransUnion — use many variables to set your credit score, each using a different formula. One primary factor is your credit utilization ratio, which is the amount of credit you use compared to how much you have available.
Making a large purchase will get you closer to the credit limit placed on your card. That high ratio might negatively impact your credit scores.
However, one action — or inaction — that will undoubtedly tarnish your credit history is missing a payment. You will see a significant drop in your credit score if you miss an installment because you can’t afford to make the higher monthly payment.
MORE: How to Increase Your Credit Score When Buying a Car
Credit Card Transaction Fees
It’s mentioned above and worth repeating: You might pay an additional fee when using a credit card to buy a car. Any transaction fee or convenience fee passed along to you instantly increases how much you pay for the vehicle. And that surcharge — often 3% or more — may exceed any financial benefit of accruing points or miles or other promotions from the credit card company.
Credit Card Rewards
The potential for a tremendous boost in their rewards balance may lure some point hoarders into using a credit card to buy a car.
Even using a rewards card to make the vehicle’s down payment might help satisfy any spending requirements for bonus points, miles, or cash back from the credit card company. While accumulating points may get you closer to your next airline flight, be sure that surcharge fees or interest charges for the large purchase don’t outweigh the value of the points accumulation.
Even consumers who intend to pay off the entire balance as soon as the charge appears on their credit card statement should do some calculations before buying a vehicle with plastic. Financing a new car at a dealership opens the door to manufacturer’s incentives that are often more lucrative than a windfall of credit card points. You can pay off a loan from the automaker’s credit arm just as easily as you can pay the balance of a credit card used to purchase the car.
Car Manufacturer Credit Cards
Some automakers offer branded credit cards designed to allow cardholders to accumulate points redeemable toward vehicle sales and service at dealerships.
True, these loyalty programs tied to credit cards can help reduce the cost of vehicle ownership by using points for discounts at dealerships. However, even the biggest spenders must make a considerable amount of eligible purchases just to make a dent in the cost of a new car.
For example, one manufacturer currently offers 3% back on gas, insurance, tolls, parking, and dining charges. It gives 10% back on service at company dealerships and 1% for all other purchases. Let’s assume a credit card offers a flat 3% back for all purchases in broad, generalized terms. If you spend $2,500 each month for a year, you will earn $900 toward a vehicle purchase. Even with an annual $200 statement credit, that’s not a significant portion of any car’s sticker price. The average transaction price for a new car today exceeds $48,000, and the average listing price for used vehicles is $25,500.
Options Other Than Buying With a Credit Card
Unless you can pay the entire balance before it’s due, using a credit card to buy a car probably isn’t your best choice. Other payment options may help you minimize interest charges and reduce the potential for the negative financial impact of carrying high credit card balances. Consider these alternatives before you pull a card from your wallet.
- Apply for financing. Interest rates for most auto loans are lower than typical rates for credit cards. Use our car loan calculator to help you estimate monthly payments and the amount of interest you’ll pay for financing. Shop around for the best interest rate before you get to the dealership. Even if your credit score isn’t great, you may find a lender with a better deal than your credit card company.
- Use a loan co-signer. If your credit score is very poor, consider asking a family member or close friend with better credit to co-sign a car loan. This technique may help you qualify for financing and obtain a rate that is better than what you get on your own.
- Pay with cash. A fundamental rule of car shopping is to buy within your means. If getting an auto loan is not possible, use some but not all of your cash savings to buy a less expensive car. Having a cheaper car now may be better for your long-term financial health. Avoid obtaining a cash advance from your credit card because this type of transaction often comes with additional interest and fees.
- Trade in a car for a down payment. Use your current vehicle’s trade-in value to offset the cost of your next car. Your clunker might not cover the entire down payment, but it will reduce your expenses and help keep a hefty charge off your credit card. You can even shop the car around to get the best deal and use the funds at another dealership. Try our Instant Cash Offer tool that lets dealers make you offers on your vehicle with no obligation.
Is It Smart to Buy a Car With a Credit Card?
Buying a car with a credit card isn’t the best financial decision. Most dealers set a maximum amount for credit card transactions, and if you can find one willing to take a card for a vehicle purchase, they will probably add a processing fee to your total. There is no good reason to spend more on a car than necessary. Also, a high-dollar transaction can negatively affect your credit score. Before swiping your card to buy a car, there are better options to consider.
Editor’s Note: This article has been updated since its initial publication.
I need a credit card that works for me, to purchasing a vehicle, the whole amount of what I purchase
Every argument here assumes the cardholder does not/ can not pay off the card monthly. I know people who can and who have done so with a car purchase 100% on a credit card.
What would be helpful is to know if it is allowed for the dealer to pass along the 3% fees. It has been my understanding for some time that the dealer agreement with the card company prohibits this.
In fact, the dealers usually lead you to believe, without outright telling you, that you cannot buy a car on a credit card. The solution of one of my friends was this. After much intimation that it couldn’t be done, though never explicitly saying the entire purchase of a new car could not go on the card, my friend asked, point blank – ‘So, if I call the credit card company and give them your business’s name and tell them that A) You’re telling me that I cannot buy a car using their credit card, they will agree?
The dealership immediately confirmed that it was possible to put the whole purchase on the card.
He had already negotiated a written price. They then tried to add the cost of the credit card (i.e., 3%) onto the negotiated price, explaining that it was to cover their additional cost. He again suggested that he wanted to verify that this was OK with the credit card company. Again the dealership backed down.
Thanks for reading, “Les.” State laws regulate businesses passing credit card fees to customers. Credit card surcharges of up to 4% are legal in most states, and the additional fee has nothing to do with any dealer agreement with the card company. Since 2013, passing the processing cost to the customer has been lawful in all but a handful of states, as long as the merchant notifies the customer of the fee before the transaction. Perhaps your friend lives in a state that prohibits surcharges. Also, you didn’t mention how much your friend’s car cost. The selling price is important because merchants — dealerships included — can cap credit card transactions at a dollar amount they choose. That business decision is up to the merchant and, as with surcharges, the credit card company doesn’t have input regarding that policy. Any business can choose to accept or not accept various forms of payment.