Do Dealerships Accept Credit Cards for Car Purchases

Can you Buy a Car with a Credit Card?

Answer: Most dealerships allow customers to use credit cards for at least a portion of a car purchase, but policies vary widely.

Here’s a quick overview:

Scenario	Explanation
Full Purchase	Some dealerships permit paying the entire cost with a credit card, but this is less common due to high processing fees for the dealer.
Down Payment	It’s more typical for dealerships to accept credit cards for the down payment or a portion of it, up to a certain limit.
Additional Fees	Dealerships may also let you pay fees like documentation fees, registration, and service contracts using a credit card.
No Credit Cards	A number of dealerships do not accept credit cards at all for vehicle purchases to avoid processing fees.

Dealership Credit Card Policies

Several factors determine whether and how a dealership accepts credit cards for car purchases:

Credit Card Processing Fees

When you make a purchase with a credit card, the merchant (in this case, the dealership) must pay a processing fee to the credit card company.

These fees typically range from 1.5% to 3.9% of the total transaction amount.

For small purchases, these fees are considered a reasonable cost of doing business.

However, on a large transaction like a car purchase, the processing fees can amount to hundreds or even thousands of dollars, which can significantly cut into the dealer’s profit margin.

So, I assume there are dealerships who might be willing to accept a credit card to buy a car, but only if you were willing to cover the fee.

Additionally, some credit card processors don’t allow merchants to charge directly for the processing fee, so you might have to pay in cash.

Lender Restrictions

Many lenders that provide financing to dealerships have restrictions or outright prohibitions on accepting credit card payments for down payments or the full purchase price.

These policies are created to ensure that buyers have sufficient “skin in the game” and are not financing the entire purchase.

Convenience Fees

To offset the cost of credit card processing fees, some dealerships that do accept credit cards for car purchases pass along a “convenience fee” to the customer.

This fee would usually be around 2-4% of the transaction amount and covers the processing costs the dealer would otherwise have to absorb.

But as I said above, this might have to be paid in cash, because if you process the additional money onto the transaction, you’re only increasing the amount of the fee.

Advantages of Using a Credit Card To Buy a Car

Despite the potential drawbacks for dealers, there are some advantages for customers who use a credit card for a car purchase:

• Rewards: Using a rewards credit card can help you earn cash back, points, or miles on your large purchase.
• Financing: Some credit cards offer 0% introductory APR periods, allowing you to finance the purchase interest-free for a limited time.
• Consumer Protections: Credit card purchases often come with additional protections like extended warranties or purchase protection policies.

Drawbacks of Using a Credit Card To Purchase a Car

However, using a credit card for a car purchase also has potential downsides:

• Interest Charges: If you can’t pay off the balance quickly, the high interest rates on credit cards can make your purchase much more expensive compared to a traditional auto loan.
• Credit Utilization: A large purchase can significantly increase your credit utilization ratio, which can negatively impact your credit scores.
• Fees: In addition to potential convenience fees from the dealer, your credit card issuer may charge cash advance fees or higher cash advance interest rates.

Alternatives To Credit Cards For Buying a Car

Below is a table I created to help provide some alternatives to buying a car with a credit card or even a standard loan:

Alternative	Description	Pros	Cons
Personal Loan	Obtained from banks, credit unions, or online lenders to finance your car purchase.	Lower interest rates than credit cards, full amount upfront.	Stricter qualification requirements (credit score, income).
Get a Co-signer	Adding a co-signer with good credit to improve approval chances and possibly get a better interest rate.	Improves chances of approval, potentially lower rates.	Requires a willing and able co-signer with good credit.
Lease	Leasing a new car with lower upfront costs and monthly payments compared to buying.	Lower upfront costs and monthly payments.	You don’t own the car at the end of the lease.
Home Equity Loan/HELOC	Using a home equity loan or line of credit for a lump sum at low interest rates.	Low interest rates, lump sum available.	Puts your home as collateral.
Trade-In	Trading in a current vehicle to provide a down payment for the next car purchase.	Reduces the total financed for the new purchase.	Requires owning a vehicle that has trade-in value.
Manufacturer Financing	Auto manufacturers offer their own financing, sometimes with special rates or incentives.	Special rates or incentives directly from the manufacturer.	Limited to specific brands or models.

Can I Make a Car Payment with a Credit Card?

It’s generally not possible to make car payments with a credit card due to the fees which will cut into the profits of the loan.

However, there are some possible ways around this if you absolutely need to make a car payment on credit:

1. Balance transfers – Some card issuers may allow you to transfer an auto loan balance to the credit card, but you’ll pay a 3-5% balance transfer fee.
2. Third-party services – Companies like Plastiq will let you pay bills like auto loans with a credit card for a 2.85% fee.
3. Peer-to-peer payments – Services like Venmo or PayPal may code the transaction as a purchase if paying an individual, but not all lenders accept these.

My Final Thoughts

Yes, it might very well be possible for many dealers to agree to accept at least some portion of the cost of the car on a credit card. However, this will likely be easier to do at small independent dealerships and require some sort of additional charges for credit card processing.

All that being said, try your best not to use a credit card to buy a car because the interest rates are the worst rates around for auto lending.

Sources

• https://www.bankrate.com/finance/credit-cards/buy-car-with-credit-card/
• https://www.incharge.org/understanding-debt/auto/using-a-credit-card-for-car-payment/
• https://www.forbes.com/advisor/credit-cards/can-you-buy-a-car-with-credit-card/