Car Purchase with A Credit Card – Is It A Good Choice?
Can you actually buy a car using a credit card? The answer to this question is yes and no. Confusing, is it not? Well, our response has a lot of depth to it that we will discuss in this blog. Various external factors influence this possibility. Some of them include credit card policies that your dealer abides by, auto lender’s credit card policies, along with your credit limit and financial standpoint.
Can You Buy A Car Entirely Using A Credit Card?
You can use a credit card to buy your dream vehicle, be it a car or any other. However, there is a catch to it. When it comes to credit cards, it is not possible to pay the entire amount off them. Instead, you can charge a portion of the whole sum, like its down payment.
Should You Buy A Car Using A Credit Card?
In case you have to pay a convenience fee to start the transaction costs of the merchant, this additional charge may dissolve the advantages of using a credit card.
Moreover, your financial strength plays a huge role. If you are not able to pay off the amount on your credit card every month, you will end up giving more money on the whole due to interest accumulation over time.
Furthermore, the limit may take a hike if you buy a car with your credit card. Why so? Well, big purchases on credit cards have the ability to impact your credit utilization ratio, the percentage of your credit limit currently in use.
And since this credit utilization ratio amounts to a part of your credit score, a large purchase, such as making a payment for a car with a card, may lead to a temporary dip in your report.
Do All Car Dealers Accept Credit Cards?
No, acceptance varies; some do, and some don’t. Few car dealerships take credit cards as a payment method for the entire amount of the vehicle or maybe just the down payment on the car loan. At the same time, few do not accept them at all.
There is a reason behind it; every time the dealers accept credit card payments from a person who wants to buy a car, they have to give a “credit card processing fee.” Usually, this ranges from 1% to 3.5% of the total transaction amount.
The fees on processing can add up quickly on large buyouts. If you want to buy a $30,000 car and make a payment with a credit card, the car dealers will have to pay a processing fee of 3%. So, it rounds up to $900 on that one transaction.
Therefore, to not pay an additional hefty credit card processing amount, a lot of dealerships accept alternate forms of payment. This includes cash, personal check, money orders, cashier checks, and ACH transfers.
Final Words
You must do thorough research before planning to make large purchases, such as buying a car with your credit card. Talk to your dealer and also get in touch with a lender for a better approach. Contact Advantage Finance LLC for more information on this matter.