Can You Buy a Car With a Credit Card?

Can You Buy a Car With a Credit Card?

Written by Mark Gregorski
Fact-checked by Caitlin Wood
Last Updated December 9, 2021

Behind homes, cars are usually the highest-priced items individuals buy. And like with homes, most people resort to credit to be able to pay for them. It’s now become habitual to walk into a dealership, choose a vehicle to buy, obtain financing, and work to pay it off over several years. To help facilitate this process, lenders have created a variety of credit products designed for those who need a car but don’t have the luxury of paying for one with cash.

While most people opt to finance their car purchase by way of a car loan, there is also the option to use a credit card. The question is – is it a smart idea to do so?

Can You Buy a Card With a Credit Card?

While it’s technically possible for you to buy a car with a credit card, car dealerships may be hesitant to accept this method of payment.

As buyers, we often forget that it costs businesses money to accept purchases made with credit cards. Dealerships are no different; they can wind up paying 3% or more in processing fees, which adversely affects their profit margins. Unsurprisingly, they may be hesitant to allow credit card purchases.

Find out when you should use a credit card over a personal loan.

Most dealerships will allow you to use your credit card to pay for a portion of the price, usually up to $5,000. Others will downright disallow using a credit card or severely restrict how much credit you can use. If there is a specific dealership you’re targeting, it’s wise to give them a call beforehand to garner details concerning their credit card policy.

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Will You Get Credit Card Reward Points if You Buy a Car With Your Credit Card? 

Whether you accumulate reward points on your credit card will depend entirely on the credit card issuer’s policy. Some cards offer generous rewards programs, while others have strict rules on what is or is not permitted. 

Suppose your credit card affords you the ability to collect travel points, cash-back incentives, or other valuable rewards points. In that case, employing it to buy a car could be a financially prudent decision. Ensure you scrutinize the fine print, so you’re aware of what you stand to gain when making a large purchase like a car.

Cost of Buying a Car With a Credit Card vs. a Car Loan

Though buying a car with a credit card may be easy, convenient, and provide you access to a lucrative rewards points, it’s worth comparing it with the most common purchase method, a car loan.

As shown in the table below, the most salient aspect of credit cards is the interest rate they charge. Assuming your monthly car purchase budget is $306.49, you’ll end up paying $4,548.33 in interest if you use a credit card. In comparison, you’ll only pay $1,033.64 if you financed the purchase using a car loan. The rate of 19.99% is the standard rate most credit card issuers charge. If you’re not mindful of this fact, you could end up paying more in interest than you initially assumed you would.

Having trouble with your credit card debt? Try consolidating your debt.

Also, if you opt for a credit card, you’ll end up making payments for 4 years rather than 3 years. The much lower interest rate on the car loan means fewer interest charges will accrue, allowing you to pay off the balance in a shorter time frame. 

In general, large purchases on credit cards are not a good idea, as you could end up making high-interest payments for an exceedingly long time. 

Car LoanCredit Card
Car Amount10,00010,000
Interest Rate6.5%19.99%
Months to Repay36 months (3 years)48 months (4 years)
Interest Paid$1,033.64$4,548.83
Total Cost $11,033.64$14,548.83

Pros and Cons of Buying a Car With a Credit Cards

Ensure you carefully weigh the pros and cons of buying a card with a credit card.


  • Rewards: You could earn valuable travel points, signup bonuses, and cash-back rewards using your credit card.
  • Convenient: Purchasing using your credit card is an easy process with no complicated paperwork.


  • Could affect your credit score: Purchasing a large item like a car will utilize a large portion of your credit limit. Carrying a large outstanding balance for an extended period can adversely affect your credit score.
  • High-interest rates: The interest charged on credit cards can be substantial and quickly put you in a precarious financial situation, especially if you fail to make timely payments.
  • Can take longer to pay off: Credit card purchases typically take longer to pay off, particularly if you’re only making the minimum required payment or skipping payments.

Should You Use Your Credit Card to Buy a Car?

Yes, ifNo, if
You have a high credit limitWant to build your credit score or are working on improving it 
You can pay off the balance right awayYou are being charged a high-interest rate
You have a promotional 0% APR or 0% balance transfer offerYou don’t want to limit your cash flow or credit limit by making large purchases. 
Your credit card offers a valuable rewards program and/or cash-back incentivesYou’re planning to pay off your balance slowly

Factors to Consider When Purchasing a Car with a Credit Card

Can you pay it off right away?

Consider the pace at which you’ll be able to make payments. Are you able to pay off your balance in full soon, or do you anticipate a long period of payments? Keep in mind that the longer the balance is outstanding, the more interest you’ll wind up paying.

Zero Percent APR

Does your credit card come with a promotional offer, such as 0% APR?. Some credit cards offer 0% on purchases for periods ranging from 12 – 21 months, which means you’ll be able to make your purchase and not have to pay any interest. If the car is relatively cheap, you can quickly pay it off in a year or two, making a 0% APR offer an enticing one. Keep in mind, however, that once the promotional period ends, the interest rate will reset to the card’s regular rate.

Reward Caps

Credit card rewards programs vary. Most rewards credit cards offer cash back incentives worth between 1% and 5% of a purchase. Ensure you carefully examine the details to see the limits and the number of points that different types of purchases will net you. Bear in mind that the most generous rewards points are available to those with exceptional credit scores.

Do you have a high enough credit limit? 

You should factor in your credit limit when deciding to make a credit card purchase. Consider how much credit you’ll need to have available to make other purchases.

Your Credit Utilization Ratio  

Your credit utilization ratio refers to the amount of credit you’re currently using divided by the amount of credit you have available. Most credit experts advise that you should keep your credit utilization ratio below 30%. Anything higher than that can impair your credit score.

Your Credit Score

If you want to increase your credit score, a car loan would be preferable over a credit card. A car loan that you make regular payments on and pay off successfully will positively affect your credit score.

Alternatives to Buying a Car With a Credit Card

Aside from a credit card, there are other alternatives to financing your purchase.

  • Car Loan: A car loan is a form of installment credit. A lender will extend to you a lump sum to pay for your car and commit you to a monthly payment schedule, typically 3 – 7 years. The terms of the loan will require you to make payments until it’s completely paid off. 
  • Personal Loan: This type of loan functions like a car loan in that you’ll have to make regularly scheduled payments. The loan can be secured or unsecured. The interest rate on a personal loan will depend on the type of loan and the term length.
  • Lease to own: Leasing a car is similar to paying rent to live in an apartment. When the lease expires, you’ll have the option to buy the vehicle at a price agreed upon at the inception of the lease contract.

Final Thoughts

Though risky for some, credit cards can be a beneficial tool when used correctly. Before deciding whether to acquire your new car with a credit card, take an unbiased look at your overall financial situation. Examine your credit score, income, and how comfortable you’ll be with making regular payments. If you still feel apprehensive, it might be a sign that you need to consider another option.

Rating of 5/5 based on 9 votes.

Mark is a writer who specializes in writing content for companies in the financial services industry. He has written articles about personal finance, mortgages, and real estate and is passionate about educating people on how to make smart financial decisions. Mark graduated from the Northern Alberta Institute of Technology with a degree in finance and has more than ten years' experience as an accountant. Outside of writing, he enjoys playing poker, going to the gym, composing music, and learning about digital marketing.

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