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Is It Possible To Use A Credit Card To Buy A Car?

Updated: 01/14/2021 by Financial Samurai 86 Comments

BMW X1 2013

Are you wondering whether it is possible to use a credit card to buy a car? The good news is that you can! But not at every single auto dealership due to the credit card fees.

The last five cars I’ve owned have all been purchased by cashier’s checks. I loathe going into debt on an asset that is guaranteed to depreciate. In fact, I dislike buying anything that is guaranteed to depreciate!

I stopped by the BMW dealer on the way home from golf one day and checked out their new 650i coupe series. If someone could figure out a way to bottle that wonderful new car smell, they’d make millions off fanatics like me!

Given this particular 650i coupe was priced at $104,000, I decided to check out the more moderately priced 2016 X3, 2.8 litre engine SUV for $48,000.  Same new car smell for half the price. Score!

CREDIT CARD LIMITS FOR CARS

Out of curiosity, I asked the saleswoman whether I can put the car on my credit card which has a $50,000 limit.  She said, “Nope!”  The most I can charge on the card is $3,000  What the heck is the point of carrying a credit card if I can’t charge a BMW on it? Gee whiz!

In actuality, the $3,000 limit is a good thing since I’d be tempted to buy a new car every single year! I asked her why the $3,000 limit?  And she responded, “Fees, those darn fees.”  Credit cards charge 1-2% fees on average for every single purchase.  2% on $50,000 is $1,000 out the door.  Hey, kinda like PayPal fees, but not as bad!

I then told the saleswoman, “What if I just buy the car for 1% more than asking price, then can I use a credit card?”  She thought about it for a moment and still declined. Of course I would prefer not to pay more than I have to for anything. I just thought this would be an interesting solution.

“Our policy, no matter what your credit limit is, is still $3,000 maximum. The reason is we don’t want people charging their downpayment, which then defeats the purpose of a downpayment.  We don’t want a situation where a buyer purchases a car on credit, totals the car, and can’t pay either the payment or the costs necessary to fix the car!  A buyer needs to have skin in the game, that’s our bank’s policy.” explained the saleswoman.

Wait, so she’s saying I can’t borrow money to pay for a down payment to borrow more money? What the hell kind of dealership / country is this anyway? I thought we can do what the government and millions of Americans do everyday and take from one, spend it on ourselves, and never have to pay it back!

CREDIT CARD LIMITS EVERYWHERE

The $3,000 credit card limit policy is ubiquitous. I called Mercedes, Audi, and Range Rover, and they all said the most someone can charge to purchase a car is $3,000. The rest must be financed by their own bank or paid in cash.

I was really looking forward to charging $50,000 for the X3 and getting enough rebate points for a round-trip ticket to Europe. Alas, I will settle for good old Rhino, my inexpensive Honda Fit, keep the $50,000 and have the optionality of buying 100 round-trip tickets to Hawaii instead.

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Updated for 2021 and beyond.

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Filed Under: Automobiles

Author Bio: I started Financial Samurai in 2009 to help people achieve financial freedom sooner. Financial Samurai is now one of the largest independently run personal finance sites with about one million visitors a month.

I spent 13 years working at Goldman Sachs and Credit Suisse. In 1999, I earned my BA from William & Mary and in 2006, I received my MBA from UC Berkeley.

In 2012, I left banking after negotiating a severance package worth over five years of living expenses. Today, I enjoy being a stay-at-home dad to two young children, playing tennis, and writing.

Order a hardcopy of my upcoming book, Buy This, Not That: How To Spend Your Way To Wealth And Freedom. Not only will you build more wealth by reading my book, you’ll also make better choices when faced with some of life’s biggest decisions.

Current Recommendations:

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Comments

  1. Jordan says

    May 17, 2018 at 5:44 am

    A couple days ago my wife purchased a Range Rover “ used” in full with our Amex Ascend card… We paid the additional fees the dealership would incur. As I started researching this it seems what we did is very is out of the ordinary for a dealership to do… I think we must have got lucky in that. It was such an easy experience though. (will be paying off the card in full next month)

    Reply
    • Financial Samurai says

      May 17, 2018 at 5:58 am

      Given the dealership us to pay 1.5% in fees, you could have gotten 1.5% off if you paid cash.

      Reply
  2. nanny state says

    May 16, 2016 at 6:36 pm

    Here because it’s the second time now I am being told the dealer will not accept payment,Lexus,now Audi via a CC. IF someone can’t pay for their purchase,that’s their decision to use a CC.Dealers need to comply with their merchant agreement,just like the consumer with their T&C.Ask the CC company,and that merchant “agreement” response can become an “it’s up to them.” It’s a convenience to not have to go buy a money order,carrying cash literally. Otherwise,how is a non celebrity qualifying for an Amex Centurion invitation if you can’t SPEND to meet its agreement,get your value for the fee paid?NOT that I want that card,not an AMEX fan.

    Even an oyster perpetual oyster Rolex in 18k can run you around $35000,and those jewelers don’t decline a CC.Add boutiques like Louis Vuitton, Patek Philippe, Armani…The markups on these items are offensive,but still,these retailers accept CC.I am not convinced dealers have zero margin play for that ~2% fee.

    Visa, Mastercard, Amex need to have a merchant agreement hotline,not a generic customer service rep.to answer calls for denials on the spot.

    Reply
  3. donaldmajor972 says

    November 1, 2015 at 5:42 am

    I always put as much possible on my credit card. No matter what, I at least put the down payment on the card.. points, baby! My most recent car (2015 camry) I put $5000 on my card and the rest in cash. My insurance is on my card ($25/month from InsurancePanda), gas is always on my card, tolls always on card, and even registration I was able to put on my card here in MA. Again… points, baby!

    I actually put my wedding on a Marriott credit card….and it was at a Marriott, so points galore. Although lesson learned, they cap out the 3/1 bonus and total points at 25k for banquets and such…..so unfortunately everything you spend over 8kish doesn’t get the bonus (or something along those lines…..I just remember be happy and mad at the same time).

    Reply
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