Can you buy a car with a credit card?

There are many ways to buy a car, and using a credit card can be one of them. What does this involve and how does it stack up against other payment methods? We take a look.

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There are many ways to buy a car, and using a credit card can be one of them. What does this involve and how does it stack up against other payment methods? We take a look.

Key points:

You can buy a car with a credit card if the seller and card provider allows it.
Using a credit card could be an expensive way to buy a car.
It’s a good idea to consider other methods of payment.

Credit cards can be a handy financial tool. They can come with added features (such as rewards points and cashback), so it could seem like a good idea to capitalise on these by buying a car on a credit card.

But buying a car can be a big financial commitment, and credit card interest rates are often higher than other types of loans. So, it’s a good idea to weigh up the different ways of paying for one, as it could make a big difference to how much the car costs you in the long run.

Can you buy a car with a credit card?

The short answer is yes, it’s possible to buy a car with a credit card if the seller agrees to take that form of payment and your credit card issuer allows it. It’s a good idea to consider how much it will cost you to buy the car on a credit card by asking yourself:

Will the seller charge you extra for using a card?
What will the cost be in the long run if you have to pay interest?
What are the costs in having a credit card (like an annual fee)?
If paying for it another way might be more suited to your needs and budget
What other ways can you pay for a car?

Different options to pay for or finance a new or used car include:

A car loan
A personal loan
A hire purchase agreement
A novated lease agreement (salary sacrificing)
Redrawing on your home loan
Using your savings

Expert discusses: The Best Ways To Finance A Car In Australia

How do you buy a car with a credit card?

Like you would any other purchase, to buy a car with a credit card you need to provide your credit card details either via an in-person electronic method such as a point-of-sale device or online. However, there could be a few barriers to this payment going through, such as:

Your credit limit. The credit limit is the amount of money you are allowed to borrow at any one time on that card. Your purchase could be declined if your car purchase is more than this limit, in which case you might have to make alternative arrangements.
Your daily transaction limit. If your card has a daily limit it means that you can only spend up to a certain amount per day, regardless of what the credit limit is on your card.

If you plan to buy a car with a credit card, it might be a good idea to call your provider first to find out if there’s any changes that they can make – such as temporarily lifting your transaction limit – to allow the purchase to occur.

Why might a car seller refuse to take a credit card as payment?

Businesses are allowed to specify their accepted payment methods. When a customer uses a credit card to pay for something, businesses are charged a range of fees by financial institutions and credit card providers. When it comes to cars, which can be an expensive purchase, these fees could add up and may be the reason why the car dealer may not accept a credit card as a form of payment.

There are also other business costs, such as the resources and infrastructure needed to access the payments system itself. Some organisations may pass on this cost in the form of a surcharge, or an extra fee on top of the cost of the car. But there are strict rules around how much this surcharge is and how it has to be displayed to the customer.

Should you use a credit card to buy a car?

Whether or not it’s appropriate to buy a car with a credit card comes down to your own personal financial situation. However, due to the nature of credit cards, it’s a good idea to seriously consider whether or not using your credit card to buy a car makes good financial sense.

Credit cards can have high interest rates, fees and charges, and you could damage your credit rating if you don’t make regular repayments on time. Another big stumbling block around buying a car with a credit card is that you’re likely to be limited to buying through a car yard. It’s unlikely a private seller will have the facilities for you to pay using a credit card.

There are several situations in which you could consider using your credit card to buy a car:

You’ve been knocked back for a car loan. However, if you have a poor credit rating, it may not be a good idea to consider borrowing money on a credit card either.
You want to buy a car sooner. If you have sufficient credit on your credit card, it saves time in waiting for a car loan to be approved.
You want to split the cost of the car between multiple payment methods.
You’ve scored a 0% or low rate credit card, and you’re confident you can pay off the car quickly to minimise interest charges.
You can earn rewards points by putting the car on your credit card.

Before you decide how to finance your new ride, it’s a good idea to draw up a repayment plan to see whether or not you could actually afford to repay such a large debt. Canstars Budget Planner may be helpful. You can calculate what kind of monthly repayments you could afford using Canstar’s Car Loan Calculator.

How much can you put on a credit card when buying a car?

How much you can put on a credit card when buying a car can vary on a dealer-by-dealer basis. Bear in mind though that dealerships may push for you to take out dealer finance rather than accept payment by credit card. This way, the dealer may earn a profit on the sale of the car, plus interest on the finance deal.

If you decide to use a credit card to buy a car, be sure to give your bank a call beforehand as large purchases can be flagged as potentially fraudulent transactions. You can avoid this by letting the card provider know ahead of time that you expect to make a substantial payment on your card.