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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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)
Given the dealership us to pay 1.5% in fees, you could have gotten 1.5% off if you paid cash.
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.
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).
What about cash advances from multiple credit cards. Then do a balnce transfer to a reward card for 0% for a few months. Then transfer to another card etc.?
I had this experience regarding balance transfers. After I transferred some funds to a new citi card, I got an offer from Barclays for 24 months 0 apr. Also isn’t it true some cards at 0apr still have a higher monthly payment because you are paying them off over (lets say) 3 years versus 5 years?
Love your answer. We are in an “situation” right now where the dealerships are all telling us about some policy where the max they can do is $3000. We were wanting to do $4000 on AMEX, which had been pre-approved and had our own financing with Bank of America (which they actually refused because they “don’t do with BOA) and they turned us down. We walked out. They called us “stubborn” and asked if we were REALLY going to walk out on such “a great deal.” We walked. Now, we called around and asked other dealers (*Because they refused to answer) and were informed that dealerships make a required agreement with credit card companies NOT to go over $3000 on credit cards. AMEX is not REALLY a credit card (it is) because we must pay it off at the end of 30 days. It was guaranteed cash to them for the first $4000. They kept trying to get us to finance with THEM which we consistenly refused because BOA had already provided us funds. Now, our question is this: WHAT POLICY is it? Who made it? Is it LAW, and if so, where can I obtain that law? The one business has already last a sale; the one we visited yesterday has stopped the deal, for now, and we’d like to have some information. They are a HONDA dealership and are clean, nice in appearance, etc. (for what it’s worth.) We’ve complained to the BBB and posted some of this info to the world to see. (BTW: We were not aware that the Patriot Act did background checks on everyone to determine if we are money laundering OR terrorists.)
Perfect! If the government can get away with it why can’t we! Borrow, and never pay it back! So true! We live in an age where as every day citizens of our great nation, we are held to higher standards than our very own leaders of this country! Its always been this way though, government was never ment to be trusted or depended on! Obviously l am not getting paid enough as one of the “we the people” to run this country!
Um… just show them the cash… hand them the card to swipe. Tell them to hold on to the car until the transaction posts, then have them deliver the car… what kinda ratty dealerships are you going to? You get your points, they have peace of mind the car’s paid for, and they can eat the processing fee — it’s a cost of doing business, and they can’t set mins or maxs regardless of their “policy,” as it violates their merchant agreement (a privilege) with Visa, MC, AMEX, Discover, JCB, etc.
I have a policy, too: I don’t negotiate with retarded college drop-out salespeople who no absolutely NOTHING about finance; otherwise, they’d be working in finance. Salespeople are completely worthless intermediaries. If you do your homework, like a NON-college dropout, and have the $$$, there’s no argument.
They sold you on “no,” whereas you should’ve sold them on “yes, or go fuck yourself.”
Love your answer. We are in an “situation” right now where the dealerships are all telling us about some policy where the max they can do is $3000. We were wanting to do $4000 on AMEX, which had been pre-approved and had our own financing with Bank of America (which they actually refused because they “don’t do with BOA) and they turned us down. We walked out. They called us “stubborn” and asked if we were REALLY going to walk out on such “a great deal.” We walked. Now, we called around and asked other dealers (*Because they refused to answer) and were informed that dealerships make a required agreement with credit card companies NOT to go over $3000 on credit cards. AMEX is not REALLY a credit card (it is) because we must pay it off at the end of 30 days. It was guaranteed cash to them for the first $4000. They kept trying to get us to finance with THEM which we consistenly refused because BOA had already provided us funds. Now, our question is this: WHAT POLICY is it? Who made it? Is it LAW, and if so, where can I obtain that law? The one business has already last a sale; the one we visited yesterday has stopped the deal, for now, and we’d like to have some information. They are a HONDA dealership and are clean, nice in appearance, etc. (for what it’s worth.) We’ve complained to the BBB and posted some of this info to the world to see. (BTW: We were not aware that the Patriot Act did background checks on everyone to determine if we are money laundering OR terrorists.)
I only spend money I have, but I use rewards card to get a bonus income while spending money that I would have spent anyway. It makes a huge amount of sense to me to save up the full cost of the car in a “car fund”, charge as much as possible of the price to a rewards card, and then use the cash you saved up to pay off the card and complete the car purchase. When you later get the reward, you can put that into retirement or towards something else that you are saving for.
When I bought my motorcycle they allowed me to charge 2k to my credit card. I would of charged the whole 8k if they let me. After all I was ready to pay with a check in full. Better to take advantage of the points if your intent is always to pay the CC bill in full. If your carrying a balance then your probably not getting the points worth because of interest racking up.
Several years ago, I went to AAA and bought 20K in Travelers Cheques. I received 1.5% back in cash from my American Express ($150). I then deposited the Cheques directly in my account. Then wrote the dealership a check for 20K. I paid off the Credit Card the next month. Was it worth $150 tax free for a short drive across town. I would say, Yes.
PS: AAA has since changed their policies to thwart this. American Express was the only credit card that did not treat Travelers Cheques and cash advances. AAA no longer allows you to use American Express for this reason.
Good strategy! Now I’m wondering whether all these 0% credit card checks can be used when buying a car. I have a feeling the dealership will want a cashier’s check instead.
Your experience is not the norm. I purchased a used vehicle at over $10,000.00 on two credit cards and the Toyota dealership didn’t even blink an eye when they said “YES!” I also bought a $6,000.00 sport bike a few years ago on a credit card purchase. All I can say is go somewhere else and maybe call around before you go to the dealership.
A spokesman for Visa e-mailed me this response, which mirrors MasterCard’s position:
“U.S. merchants must follow basic card acceptance rules for all Visa transactions. Visa’s rules do not allow merchants to impose a maximum transaction amount as a condition for honoring a Visa card. Our rules require merchants to always honor valid Visa cards regardless of purchase amount — large or small.”
Very interesting!
But, the decision is ultimately up to the car retailer because 1) it costs them money if a consumer pays by credit card (good for consumer, bad for car dealer), and 2) the car dealer has to weight the risk of the veracity of the credit card, credit, potential dispute, etc.
Of course the credit card companies wants consumers to put $50,000 on their cards. More fees!
If you look at the credit card agreement- most if not all prohibit you from buying real estate or vehicles with the card or the courtesy checks they send. If you do this and they pick up on it (and they will) they usually demand immediate payment for breach of contract- no matter what your credit limit may be. Know the rules before doing something stupid- ignorance will not absolve you from the breach of contract- plus they can sue you if they decide to pursue the matter…
Bought a used car in 2011 and used a BoA courtesy check for 12 months at 0%. Also paid a $90 fee (3% of the total on the check) but I figured it was better than using the money in the bank. I kept that card out of my wallet so I didn’t use it for anything else, and just paid a set amount every month until it was paid off. Now that card sits at a $0 balance because I hate BoA, but they do love to send courtesy checks.
I’m thinking about buying a new car soon and might use my Chase card to get reward points. That is assuming they’ll let me charge $5000 or more.
That’s a pretty good idea actually Brett! I get those 0% courtesy checks on occasion as well. Might as well use them if we are responsible enough to pay it off BEFORE the 0% rate expires!
I was reading this thread because i’m about to buy a new car. I have financing but want to use 2500 from my new Discover card for the down payment. I have 0% apr for the first 15 months of the card and thought this might be a smart way to go. Keep reading differing opionions on whether or not to use the cc for the downpayment. Any thoughts?
$5K on a down payment at a Honda dealership (NJ) and a Lexus dealership (WA).
Wow… that’s the most I’ve ever heard, and for a Honda dealership no less where the ASP is lower. Go get em! Just make sure they don’t rape you on the selling price!
This last week was probably the most expensive week I’ve EVER had for my poor credit card. I actually did just buy a car, so I put $2500 of the downpayment on my credit card (the max, to get the points; the rest I paid for with a certified cheque), AND I prepaid my car insurance for the year, also to get the points since paying monthly by credit card wasn’t an option, which was another $2000. (Car insurance in a large city is EXPENSIVE.)
I would have put the whole downpayment on my credit card if they’d let me. Of course, I would have paid it back immediately, since I had the cash on hand, but I can see how it’s good that they have rules like that for people who aren’t quite as responsible.
Beyond that, the most expensive thing I’ve ever charged was a computer.
I bought a used car at a Mom and Pop dealer. They would only allow me to charge $500 on my credit card for the $5,000 car. I did end up putting everything on my credit card though. I called up the credit card company and wasn’t charged a cash advance fee. After the transaction went through, I transferred the balance to another card that offered 0% for two years and didn’t charge a transfer fee (this was back in the day). Then, I did the math to determine what it took to pay off the balance in two years and did that.
It was a bit of work, but was worth it for me.
I had never realized there could be a limit on a credit card charge that was lower than my credit limit. I wonder if there is leniency for used cars? If I wanted to buy a $5,000 used car on my card with a $20,000 limit, I could easily afford the replacement cost.
I asked the dealer if I can use my credit card to pay for down payment. He said “sure, how much?” I wasn’t really thinking and said “$3,000” and he proceeded to complete the transaction. He never once mentioned the credit card limit, perhaps because the situation didn’t call for it, i’m not sure. I was happy nonetheless since I got 1% back in credit card rewards.
My first reaction to the title was What? That’s crazy! However, after reading the post I thought it was an interesting idea and wondered why I’d never thought of it before. We’ve received those courtesy checks from the credit card companies, and I just shred them because of the hefty fees. It was cool reading all the comments with ideas on how to get the most out of your credit card rewards, I guess I need to start thinking outside the box!
I paid 12,000 Fed tax and 3000 state tax this Dec. I got dinged about 400 in fees. But i did it so that i could get a free British Airways travel together voucher. i dont know many people who pays taxes with their credit cards… but now i can take my wife along in First class to Europe for about 140k in Ba miles and some ridiculous BA surcharge fees…
Anyways I still think its worth paying taxes with your credit card.. if you manage to get bonus points/miles/vouchers for those extra points