Can You Buy A Car With A Credit Card?
One of the first and most basic lessons we learn when we use a credit card for the first time is not to charge items we cannot afford to pay off at the end of the month. In short, don’t use that credit card you just got in the mail to charge an elaborate vacation or go on a shopping spree unless you have the cash available to pay off the balance at the end of the month. That pretty much makes it impossible to purchase a brand new car with your credit card, then.
On that note, who would charge a car to a credit card? If you cannot afford to pay cash for a new car, you finance it at the dealership or with your credit union or bank, make payments for the allotted time frame on your finance offer and eventually own the car, trade it in or do whatever it is you like to do with your new vehicles every few years. Charging it to a credit card seems like a very unnecessary waste of money. For one, you’re certainly not going to get a lower interest rate on a credit card than you would an actual car loan from a bank. Why would you want to charge an item that costs tens of thousands of dollars to a card that charges double, sometimes triple the interest rate of a new car loan through a standard bank or credit union, or even through dealership financing?
To earn reward points, of course.
That’s what one man did when moved back to the United States after he was stationed in Japan with his family for several years. Don’t raise your judgmental eyebrow just yet, friends. He and his wife saved up the cash that they needed to purchase their new car outright, but they decided that they wanted to see if they could benefit a bit more from their very hard-earned new car purchase, so they asked around about putting the purchase price of the car on their American Express charge card. On this particular card, they do not have the option of deciding they’d like to take a little longer to pay it off. It’s a charge card; the balance is due in full at the end of the month.
The process wasn’t that simple, however. Most car dealerships will not take a credit card payment for a car, only as a down payment and only for an amount equal to or less than $5,000. What this meant for this family was that they’d either have to buy a very cheap car, or ask if someone would be willing to do something out of the ordinary for them. The family checked out five SUVs and five dealerships. Of the five, only one was willing to run his credit card in multiple $5,000 increments so that he could put the entire balance on the card.
In the process, someone mentioned to the finance manager that doing this would cost the company 3% of the total cost of the vehicle due to credit card fees and he nearly decided that he would not be willing to go through with the transaction. However, he’d already committed to doing so and he ran this family’s American Express card multiple times until the car was purchased in full and no financing was required.
What his family earned from this transaction is impressive. For one, they have no car payment and a brand new car. Secondly, they have earned 40,000 points within their American Express account that they can use to book airline travel, hotels, buy merchandise or gift cards or redeem as statement credits. Finally, they were able to pay the balance of their new car purchase in cash when the bill arrived in the mail so they never incurred even one finance charge.
Essentially, the family paid cash for a new car, saving every bit that they could while the family was stationed in Japan and did not need the vehicles that they sold when they moved there for the husband’s military lifestyle. Now they are back in the states driving a brand new vehicle with no payment thanks to the fact that they were disciplined enough to save throughout the course of his duty overseas.
One thing to keep in mind with a situation like this is that it is not the rule. It’s highly unlikely you will find willing participants in a situation like this, because companies do pay credit card fees to card companies; and a vehicle is a big purchase. Out of five dealerships, this family only found one that was willing to work with them to complete this transaction, and the finance manager who approved the transaction probably had second thoughts about it once he was done. He likely will not allow this type of transaction to happen again. On that note, we did learn a lesson here; it never hurts to ask. Additionally, even if you plan on paying cash for a new car, you can still ask if you can charge a portion of it to your card if you plan on paying it off and want to earn at least a portion of the reward points that this man and his family earned. It’s a big purchase, which means big points.
We recommend that you find the card with the most reward points available for every dollar you spend so that you can earn as many points as possible. Pay off the down payment when the bill arrives and don’t incur any finance charges on that transaction. It’s a big one, so the finance charges are expensive. At the end of the day, most people will not find it possible to charge an entire vehicle to their credit card, but they will find it possible to ask. The worst that a car dealership might tell you is no, and then you’ll have your answer. However, if the tell you yes, you have your answer and more rewards points than you ever thought possible with one single purchase.
Photo by Getty Images