Is it possible to buy a car with a credit card?
Sometimes — but a credit card isn’t usually the best option for car-buying.
While you can typically use a credit card for just about anything, car dealerships may not accept credit cards as a way to pay for a car’s full purchase price. Dealers may, however, accept a credit card for a car down payment or partial payment even if they limit full payments.
For any credit card payment, the dealership may also charge you a fee to account for processing fees on their end. If you’re purchasing from a private seller, they most likely will not accept credit cards for any portion of the payment.
Risks of using a credit card to buy a car
There are several risks to buying a car with a credit card. Most significantly, your interest will start to add up, especially if you don’t have a plan to pay off your full statement balance. The average interest rate for a car loan is significantly lower than the average credit card interest rate. This means using a card could quickly become more expensive.
Dealerships may also impose certain restrictions that make paying with a card more difficult. These could include:
- Limits on how much you can charge to your credit card
- An additional convenience or processing fee
- Accepting a card for down payments only
Additionally, your card’s credit limit may not cover the full car payment, which means you’ll still have to find other methods for any unpaid amount.
Potential credit impact
Before using a credit card to buy a car, it’s also worth understanding how the purchase could affect your credit. Even if a dealership accepts credit cards, the amount you charge can impact key factors of your credit score.
One of the biggest considerations is your credit utilization rate — the amount of your available credit you’re currently using. A car purchase could quickly raise that rate, which may lower your score until you pay down the balance. Aiming to keep your utilization below about 30% of your total available credit can help protect your score.
Payment history is another major factor. Missing or making late payments on a large balance can significantly hurt your credit, especially if the payment is more than 30 days overdue. Setting up automatic payments or reminders can help you stay current.
Finally, consider your credit mix, or the variety of account types in your credit history. Paying with a credit card doesn’t add an installment account to your credit history the way an auto loan would, but whether that matters depends on the credit accounts you already have. Lenders like to see that you can manage different kinds of credit responsibly, so think about how this purchase fits into your overall mix.
How to use a credit card responsibly during a car purchase
If you’re set on using a credit card for all or part of the transaction, do so responsibly.
Confirm your dealership accepts credit cards. Find out how much they’ll let you charge to a card. Policies differ across dealerships, so be sure to do your research ahead of time.
You’ll want to pay off the amount charged to your card as soon as possible so as not to accrue interest. You should also be aware of your credit limit and whether the amount you’re planning to cover is within it.
Alternatives to buying a car with a credit card
When it comes to a car purchase, traditional auto loans typically offer more favorable payment terms than credit cards. However, if you’re worried about a down payment, you can try tapping into your savings or using cash if it’s available. Trading in your current car and putting the purchase price toward your new car may also help lower the overall cost.
If you don’t have enough funds to cover the down payment, you may want to consider saving until you have enough to do so. That way, you won’t end up with unnecessary interest charges and further damage to your credit that could make it more difficult to obtain loans and credit cards in the future.
Disclosure: This article is for educational purposes. It is not intended to provide legal, investment, or financial advice and is not a substitute for professional advice. It does not indicate the availability of any Citi product or service. For advice about your specific circumstances, you should consult a qualified professional.
