Buying a car with a credit card often an uphill fight

Rewards await those who overcome auto dealers' reluctance


Swiping a credit card to buy a car could give you convenience, consumer protections and perks. But most dealers hate plastic, so you might have to wheel and deal.

There are a few exceptions, but the general rule is that dealers won't let you pay the entire amount of a car purchase on plastic, says Mike Rabkin, owner of the car negotiation service From Car to Finish.

That's because car dealers, like other merchants, have to pay a credit card processing fee that varies from 1 to 3 percent, or higher, depending on the card, he says. So, what if you wanted to charge a $30,000 car? "A dealer could lose major money," he says.

Can you charge your next car?

The good news? Most dealers will let you put part of a car's sale price on a card, says Mark Rogers, a consultant for the National Automobile Dealers Association.

"They don't want to, but they'll do it to keep the customer happy," he says.

Porsche on plastic? Perhaps
Most car dealers try to impose a limit, which sometimes is negotiable, on the amount you can put on a card, experts say. Typically, that cap ranges from $2,000 to $5,000, Rabkin says.

Car dealers pretty much have to accept credit cards for partial payments because their agreements with credit card issuers forbid them from refusing plastic outright, Rogers says. "If push came to shove, a consumer could call their credit card company and tell them the dealer wouldn't accept the card," he says.

However, the average dealer profit on a $30,000 car might be only $1,000 to $1,500, Rogers says. So, if a dealer had to pay a 3 percent transaction or "swipe" fee, or $900, on the purchase of that car, it could eat up their entire profit, Rogers says. "So they try to limit the use of credit cards as much as possible," he says.

Still, there are two big exceptions to the credit card payment caps, experts say: used cars more than a few years old and cars that cost upward of six figures.

They don't want to, but they'll do it to keep the customer happy.

--Mark Rogers 
National Automobile Dealers Association

For example, if you're buying a $5,000 used car off an independent car lot, there's a good chance the dealer would jump at an offer to let you pay the entire amount with credit, says Philip Reed, senior consumer advice editor for the automotive site

Retired Florida firefighter David Pressler did exactly that when he found a 1999 Buick Riviera -- his favorite year, make and model of car -- for sale at a dealer in Connecticut. The price had been slashed from $5,500 to $4,000, and Pressler called and paid in full with plastic. "I wanted assurance that the deal was done and nobody was going to come in an hour later with a check," he says. "I liked the security and documentation of using a card."

The other exception to the no-full-payment-on-a-card rule is ultra luxury cars that cost $100,000 or more, such as Ferraris, Lamborghinis, Bentleys and Aston Martins, Rabkin says.

The reason? A dealer is likely to make a much larger profit on those cars and can afford to lose a small percentage, he says.

Consumers who buy those cars are used to being put on waiting lists and usually are more concerned with color and features than price, he says: "They say, 'Sure, I'll pay sticker price. When can you get me the car?'"

The road to rewards ... or debt
So what's the benefit of putting a car on a card? In a word: rewards.

Most consumers who want to use plastic in a car purchase are trying to get points or airline miles, Rabkin says. That's why he charged $5,000 of his new Acura TL purchase on a 2 percent cash back credit card a few years ago. He then paid off the balance in full. "I was going to pay that amount with a check anyway, so why not make $100?" he says.

Other consumers use a card in a financial pinch, experts say. The practice of putting part of a car on a card due to a shortage of cash was much more common at the height of the recession in 2008 and the years that followed, but it still happens, Rogers says.

It can be kind of a dangerous thing to do.

-- Phillip Reed

Thomas Nitzsche, who works in media relations for the nonprofit ClearPoint Credit Counseling Solutions, had lost a previous job and was using a car borrowed from family when he found a nice used Mazda Protege for $3,500 from a private seller. But he had only enough cash to pay half. He says he used a credit card cash advance to pay the other half, then used a 0-percent balance transfer deal to avoid interest.

"I paid it back aggressively, and it really worked out well for me," he says. But, he adds, he would generally caution against taking a cash advance to pay for a car due to high fees and APRs on credit card cash advances.

In fact, using a card to pay for part or all of a car can lead to debt, especially for consumers with a shaky history around credit cards, Reed says. You might think you'll pay your balance off quickly, but then you get hit with job loss, medical bills or other financial curveballs. If you then start making only minimum payments, interest can rack up quickly and you can get in over your head, he says. "It can be kind of a dangerous thing to do," Reed says.

1. Make sure you're getting a good deal You should start by negotiating a good price on the car, Reed says. Do your research ahead of time by using car pricing guides such as those offered by or to find out what the car is worth, Reed says. And if the dealer is too willing to let you use a credit card, it might mean the price you're paying for the car is too high, he says: "You might want to re-examine the deal."
2. Run the numbers No matter why you're using a card, it's smart to tally up exactly how much that move will benefit (or cost) you. For example, if you're using a 2 percent cash-back card and you can charge $5,000, you'll get $100 back. If you're using a card because you lack the cash for a $5,000 down payment, calculate how much interest you'll pay and add it to the total price of the car, experts recommend. If a high-interest card is your only option, and you can't pay the balance in full, you might want to reconsider using plastic, Rabkin says. "Don't incur debt at some crazy interest rate."
3. Don't get tunnel vision Avoid getting so focused on using plastic to get a few hundred dollars in rewards that you ignore the $1,000-plus savings you could get with a good dealer financing deal, Reed says. Zero-percent financing deals are prevalent today on two types of cars: basic family sedans -- for example, the Toyota Camry, Honda Accord and Ford Fusion -- and also on cars that aren't selling well, Reed says. Consumers with credit scores of 700 and up should have no problem getting approved, he says. Putting the down payment on a rewards card -- if you pay it off right away -- and getting a 0-percent deal could get you substantial savings, he says.
4. Reveal your card use strategically. Don't tell the salesperson you plan to use plastic until after you've negotiated the price of the car, Rabkin says. That's because a salesperson might not go as low on price if he knows the dealership will be paying a card's transaction fees, he says. While it's generally good to discuss price separately from financing to avoid confusion, Reed says, you shouldn't try to trick a dealer. "We don't like when they do that to us, so why would we do that to them?" he says.
5. Be persistent. When he pulled out his plastic to pay for part of a slightly used minivan at a Cincinnati Chevy dealership, college teacher Michael Detzel got a firm no. "They didn't want to take the card," he says. "Period. End of story." But each time he got turned down, he asked to speak to a supervisor and worked his way up the management chain. "I'd say, 'If you can't do it, who can?'" At first, Detzel had asked to put half the $25,000 purchase price for the 2013 Chrysler Town & Country on his 2 percent cash-back rewards card. The dealership finally agreed to $5,000. "What I had to do was threaten to walk away," he says.

See related: How to score a rental car using a rewards credit card, Tips for landing a good, reliable used car when you have bad credit

Published: September 4, 2014

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