It’s a no-brainer that buying a new car is a large purchase; one of the biggest of your life. It can also be one of the most enjoyable experiences or an incredibly stressful one. We aren’t talking about test-driving cars and seeing what car dealerships in Canada offer - that stuff is the fun part of car buying. The stressful part is going through the actual purchase and car financing of the vehicle. Luckily, there are options when it comes to buying a car. You can purchase the vehicle with cash, lease the vehicle (which is more like renting it), get a personal loan, or you can take out a car loan. At FFUN Cars, we aren’t just about making finding the perfect vehicle easy; financing is easy, too. So easy, you can get approved online and get full financing online, without leaving your house. But, what about buying a vehicle with a credit card? Can it be done, and is it the best option? (insert thinking emoji)
Will Lenders Let You Use a Credit Card For a Car Purchase?
We’re all about making things convenient, but answering that question isn’t so simple. Technically speaking, yes, you could pay for your new vehicle with a credit card. But, (big but) the dealership you are buying from has to accept that as a form of payment - some do and some don’t. In many cases, dealerships will allow you to use your credit card for a deposit or a down payment, but not always for the entire purchase price.
Just like lenders make money off of auto financing, Canadian credit card companies want to make money off transactions, and they typically do it by charging a transaction fee. In some cases, dealerships will pass that processing fee onto the customer, which is why they try to steer away from allowing credit card payments.
What is Needed to Buy a Car with a Credit card?
If you want to buy your next car, whether it’s a used car or a new one, with a credit card, the first step is to verify the car dealer you are buying from allows that as a payment option. If they do; you’ll want to make sure you have a high credit limit to do so. We don’t consider ourselves finance gurus, but we do feel obliged to tell you that putting a large purchase, like a vehicle, on your credit card is risky. We only suggest it if you have the cash to pay the entire balance off right away, otherwise, you could get yourself into some financial issues since most credit cards come with high-interest rates.
When is it Good to Use a Credit Card to Buy a car?
The only time a credit card should even be considered as a form of payment on a vehicle is if you have a crazy good credit card offer, such as a low-interest rate that’s lower than an auto loan for enough months where you could pay the balance off within that promotional period, and your card is a rewards credit card that has rewards points or cash back rewards. If you are someone who loves reaping the benefits of credit cards, keep in mind that only those with a really good credit score and credit history qualify for them.
When is it Bad to Use a Credit Card to Buy a Vehicle?
Whether you are using your credit card for big purchases or small ones, it’s easy to get into financial trouble with them and it can significantly limit your cash flow. Historically, all credit card issuers (Visa, Mastercard, AMEX) are known for having high credit card interest rates, unless you have an incredible offer or incentive program. Therefore, you shouldn’t be using a credit card if there is high interest, because often your minimum monthly payments on a credit card will be higher than monthly car payments - the only difference is, with a credit card, the majority of your payment is going toward interest, whereas with a car loan, the payments go toward paying off the loan within a certain time frame. Not sure what you can afford or what the payments will be? Use our super-cool loan calculator to get an idea.
Although having a credit card can help build your credit score, it can (just as quickly) destroy it and therefore it shouldn’t be your primary source for building credit. Just because you have a high credit limit, doesn’t mean you should max it out. Credit bureaus look at your credit utilization to determine your score - meaning, they review how you manage your finances and whether or not you live on credit alone. If you are wanting to up your credit score, a personal loan, car loan, or line of credit are better financing options that will make faster strides than a credit card will.
Things to Consider
If (big if) the car dealership you are purchasing your vehicle from allows you to use your credit card as a form of payment, consider these things. If it’s the rewards from your card that you are after, you’ll want to check to make sure there isn’t a cap on the benefits, so read the fine print. Do you have credit space on your card to use it? If you don’t, requesting a limit increase and then maxing it out doesn’t reflect well on your credit. Finally, can you pay the balance off right away or are you going to be stuck with crazy interest charges each month?
At FFUN Cars, we are about protecting our customers and as a result, we rather work with you on getting you a secured car loan that doesn’t jeopardize your credit. We aren’t a financing company, we’re the new way of buying a vehicle that’s all about you and your convenience. You can buy your car online, in-store, or a combination of the two. Not to mention, we have some other pretty sweet benefits, like 24-hour test drives and a 30-day money-back guarantee. Check all our benefits out and browse our inventory, to see how FFUN we are.
