Can a Car be Purchased using a Credit Card?

  • 4 min read

There are plenty of stories you can find online about people who were able to charge the price of an entire car on their credit card. To be able to do so, there must first be a large enough line of credit to make that happen. No credit card lender will let you charge $20,000 for a new car when your max credit line is $7,500. For a card with no pre-set spending limit or one with a large enough line of credit, however, it is possible to purchase a car, including tax, title, and fee, on a credit card.

The problem in doing so is not necessarily the credit card itself. You will find that many dealerships are hesitant to allow a credit card purchase for a new vehicle because of what is known as the “swipe fee.”

What Is a Credit Card Swipe Fee?

According to the National Retail Federation, swipe fees for using a credit card are a percentage of the total transaction which a bank will take from a retailer every time a credit card is used as payment for a purchase. Most swipe fees wind up being between 2-3% in total. For the purchase of a new car, a 3% swipe fee on a $20,000 purchase means the dealership is going to wind up paying $600 for the “convenience” of you being able to pay with the credit card.

Is There Any Way Around the Swipe Fee?

Absolutely. If you want to purchase a car using a credit card, then you can negotiate with the dealership regarding this fee. There might be a willingness to allow the purchase if you were potentially willing to pay for a portion of the fee that they would encounter. Keep in mind, that because of these fees, some locations may have policies which forbid the purchase of a car on a credit card.

Why Purchase a Car Using a Credit Card?

In a word: rewards. Depending on what rewards your credit card is offering, you can take advantage of some outstanding values by making your purchase with a credit card. This is especially true if you have already saved up a portion of the payment to apply to the purchase you are about to make. It is also a convenient way to make a purchase if you do not want to deal with the hassle of a car loan or running to the bank to get a check cut in secured funds.

What Are Some Problems That Can Come Up?

The biggest issue that you will find when using a credit card to purchase an automobile is that many dealerships have a cap on the amount of a single transaction – say $5,000, for example. If you are trying to purchase a $20,000 vehicle, then the dealership would need to put through four separate transactions.

To avoid difficulties during this process, it is often necessary to contact the credit card lender before the transaction to make sure they are aware of what your purchasing intentions happen to be so they don’t freeze the card for some reason.

Are Some Credit Cards Better Than Others for This?

The best way to purchase a car in this way would be to use a credit card like the American Express Platinum Card.  Unless you decide to enroll in their “pay overtime” feature, there is no pre-set spending limit on this card. This also means you would have to pay the card off in full at the end of the month, but it would allow you to complete the transaction very easily.

Buying a car using a credit card might not be for everyone, but it could be for you if you have an idea of what will happen during the transaction. Generally dealerships will only allow you to put a deposit on a car using a credit card. This allows you to take partial advantage of the rewards that a credit card purchase can provide while buying a new car. Usually a certified check or financing is required to pay for the outstanding balance.

Christopher - BSc, MBA

With over two decades of combined Big 5 Banking and Agency experience, Christopher launched Underbanked® to cut through the noise and complexity of financial information. Christopher has an MBA degree from McMaster University and BSc. from Western University in Canada.