Buying a car with credit card?

[Joyful2018]

I have 0% on my new freedom flex for another year. Thinking of buying a used car with it. Pros & cons I need to think about? It will be a little more than 50% of the limit. Will it drop my credit score cause of debt ratio? Tia

 

[cvjw]

Just an FYI, most dealerships will only let you put a few thousand dollars on a credit card. The fees are too high for them to eat them for the whole purchase price. Some dealerships we have used went as high as $5000. One was $2000.

 

[tvguy]

A lot of car dealers won't take a credit card. Cash, check, or finance only. The fees are too much for them to accept a credit card.

 

[afan]

I have 0% on my new freedom flex for another year. Thinking of buying a used car with it. Pros & cons I need to think about? It will be a little more than 50% of the limit. Will it drop my credit score cause of debt ratio? Tia

You need to talk with the dealership, they don't all take cards or may only take a small amount.

If you can't pay it off within that year then what's the plan? A balance transfer to another card or do you have the cash and just wantnt to leave it invested until you pay it off?

Yes it will affect your score but it isn't just how much of that card it's using but how much of your overall credit limits are you using. Unless it's your only card then it'll affect more.

It really comes down to why you want to do it, what your score is now, meaning it may not matter you have a balance that high.

 

[DLgal]

The dealer we last purchased from would only allow $5000 to be charged to a credit card.

 

[Joyful2018]

We will be buying from an auction, one we've bought at before but with cash (they do accept credit cards). I would like to keep the cash on hand and utilize the 0% on the freedom. We will pay off before the 1 year is up. Credit score is 805

 

[afan]

We will be buying from an auction, one we've bought at before but with cash (they do accept credit cards). I would like to keep the cash on hand and utilize the 0% on the freedom. We will pay off before the 1 year is up. Credit score is 805

With that score I'm guessing you have other cards and carry no to little balance since you have the cash to pay for the car. It won't ding your score too bad and it'll go up as you pay it down.

Now it would be beneficial to try and pay other cards before the statement cuts so a 0 bal reports which will help too. It just depends on how much credit overall as well.

Mine can go down 2 to 3 pts because a higher balance posted yet still well under 5% utilization but then it goes back up when the payment hits.

 

[_19disnA]

If you have the cash to pay for it, I am not sure what you gain by charging it. Do you get frequent fly points or some other benefit from charging on that credit card? If you are planning to make other large purchases would be the only reason to worry about your credit score (i.e financing a new home) since you might get charged a higher interest rate. Not sure any of us know the exact formulas used by rating agencies to determine your credit score. If the auction house lets you pay with a credit card, not sure this purchase would be any different from buying new home appliances or furniture of similar value.

 

[DLgal]

If you have the cash to pay for it, I am not sure what you gain by charging it. Do you get frequent fly points or some other benefit from charging on that credit card? If you are planning to make other large purchases would be the only reason to worry about your credit score (i.e financing a new home) since you might get charged a higher interest rate. Not sure any of us know the exact formulas used by rating agencies to determine your credit score. If the auction house lets you pay with a credit card, not sure this purchase would be any different from buying new home appliances or furniture of similar value.

If you have a zero percent interest for a year on a credit card, it makes more sense the keep the cash in an interest bearing account and slowly pay off the credit card. Also, probably get points or miles on the credit card.

 

[_19disnA]

Guess it depends how much they would make in interest. If it's around $5,000 @ 1% that is only $50/year, some banks pay far less. If planning to make any large financed purchases & the credit score goes down due to that transaction, the higher interest rate on something like a new home would certainly be far more then $50/yr.

 

[LAS2AMS]

My suggestion is to take out a loan. Shop amongst your local credit unions - I’ve found rates are as low as 1.24% for 3 years, and 1.75% for 5 years. (Eligible for cars 2014 and newer). Better rates may be available!

Get a pre-approval from your credit union and use it to shop at various dealers and lots. You can even finance a private sale! Don’t be fooled into thinking you have to use their financing...

 

[DisneyHardin]

We bought a new car in September and the dealership let us put a $2000 down payment with our CC and then we financed the rest at 1.5% interest. It was nice to get those points from that down payment.

 

[Robbydj13]

Just an FYI, most dealerships will only let you put a few thousand dollars on a credit card. The fees are too high for them to eat them for the whole purchase price. Some dealerships we have used went as high as $5000. One was $2000.

This right here. I bought a new car last year and wanted to put it all on my CC and then pay it off that same month, but the dealership restricts CC amounts to $5000 or less. So I put $5k on it then wrote a check for the balance. Hey...at least I got some points out of it

 

[seashoreCM]

If it is the credit card company who advertised and offers the zero percent transaction or transfer and you also use the same credit card for other things then your payments might go first towards the zero percent offer while the other things will stay on your account longer and rack up the usual 20 percent APR or whatever.

Some zero percent transfers charge points up front or a transaction fee, typically three percent (aka 3 points).

 

[ilikecarrentals]

My last car I paid $13,000 on my credit card for the cashback. I guess it depends on the dealership/seller.

 

[tvguy]

My last car I paid $13,000 on my credit card for the cashback. I guess it depends on the dealership/seller.

I guess it depends on how much the dealer is making on the sale. They paid about $400 in fees to the credit card company for the transaction. As long as what you paid them above their cost was greater than $400, they made money.
There are so many incentives to dealers that you don't know about. A friend was business manager for a Volvo dealership that was building a new building. Volvo said if they sold 30 new Volvos in a certain month, Volvo would kick back $3,000 per car toward the new building. She said they met the quota by selling every new Volvo for that month below their cost, but in the end they made money.

 

[kathy884]

This was a long time ago, but I once negotiated a cash price for a car after doing research, getting information from that consumer reports car buying service, and visiting a few dealerships. They let me put $1000 with balance to be paid when I picked up the car. Then I thought, wow, instead of writing a check why not use a credit card, get all those frequent flyer miles, and just pay off the credit card in full when the card comes due. My credit limit wasn't high enough for this purchase, though, so I called my credit card company and they let me double my credit limit, so that my credit limit would be high enough to charge the car. Knowing retailers pay for credit card transactions, I brought both my check book and the credit card to the dealership when paying for and picking up the car, as I wasn't sure they would let me charge the car. What the dealership told me is that they couldn't give me the agreed upon cash price we had negotiated if I used an credit card and that they would need to charge we 3% more if I did that, so I just wrote a check.

Just saying you might have to pay more to do a purchase with a credit card or the seller might limit the dollars you can charge (as others have alluded to).

I often when doing a large purchase now will ask too if I can get a discount for cash. Usually the only time that this works for me and I get a discount is if I am working with the owner of a small business or something like that. Regular employees don't usually have authority to make deals with that in most businesses it seems.

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It seems pretty silly to me to have high credit limits that you don't use, but from what I've read for maximizing a credit score is that they like you to keep credit utilization under 30% of your credit limit. I don't really understand the thinking, though, as I would think it would be better to have a credit limit that is closer to the highest amount you would ever expect to have charged in a month vs. a limit that is way more than the maximum you ever expect you would charge (but what do I know and that's not how the calculations work). If you have a great credit score, though, a score dropping some points for a higher utilization limit doesn't matter, if your score is still in the range that is considered a great/good credit score. There is a big range that is considered to be a good credit score.

 

[winterwhite]

If you’re buying from an auction the usual rules don’t apply - but I would bet they only take credit cards with a 3-5% fee associated.

 

[DisneyDad1736]

I would highly recommend not buying a car unless it’s with cash. Buy a cheap car with cash and save for a nicer one.

Cars are depreciating assets, meaning they depreciate in value. Let’s say you buy a brand new $20,000 car. The moment you drive it out of the dealership, it already loses its value by 15-20%. Invest in assets that will gain you money like stocks, etfs or mutual funds.

Just my personal advice