Can You Buy a Car With a Credit Card?

Buying a car is a major financial undertaking, with the average cost of a new car coming in at around $50,000.

In an ideal world, you'd pay for a vehicle purchase entirely out of a savings account because then you'd avoid paying interest on it. But that's very rarely how people purchase cars, since most people don't just have $50,000 sitting around.

When you're buying a car, you may wonder if it's possible to put it on a credit card. The answer to this question can be a little more complicated than you might think.

Do dealers allow you to charge a car?

In most cases, you are not going to be allowed to charge the cost of an entire car on a credit card. Dealers don't want you to do this because they have to pay credit card processing fees, which can be around 3% of the amount charged. If you're buying a $50,000 car or even a $20,000 car, 3% of that amount is a lot.

What you usually can do, though, is put a portion of the car on your card. In my experience, I've been able to charge up to $5,000 on my card for a car, and that's around what most dealers allow.

Sometimes, dealers will charge you the credit card processing fees when you do this. That's never happened to me, but it is a possibility even if you're charging only a portion of the purchase price so you will need to find out up front if you'd incur added costs.

Should you put part (or all) of your car on a credit card?

If a dealer allows you to charge part or all of your car's cost on a credit card, you'll need to decide whether this is even a good idea. And, whether it is smart or not depends on your motivations.

Are you trying to earn rewards?

You may decide that you want to charge part of a car to get credit card rewards. If that's the case and you can afford to pay the card off in full before you'd get stuck paying interest, then you absolutely should charge as much as the dealer will let you (as long as it won't pass processing fees onto you). If you can charge $5,000 in a card offering 2.00% back, you'd be able to earn $100 just for using your credit card. Why pass that money up?

Are you charging a down payment because you can't afford it?

If you're considering putting part of the car on a credit card for other reasons, though, it may not be such a good idea. For example, if you want to charge the down payment because you couldn't afford to buy the car otherwise, you could be making a huge mistake.

That's because you'd have both your credit card and car loan payments to deal with. And without any actual money of your own going toward a down payment, you would be underwater, which is when you owe more than the car is worth. That could be a big problem if you needed to sell it.

Are you just looking for the best financing option?

Credit cards also tend to have higher interest rates than car loans do. The average credit card interest rate as of May 2023 is 20.68%, while the average interest rate on a new vehicle loan was 6.5% as of the last quarter of 2022. The auto loan is a way more affordable way to borrow.

Ultimately, if you cannot afford to make a down payment on a vehicle without using your credit card, you should wait to buy the car until you're in a better financial position. And if you're hoping to finance a car, a car loan is usually a better bet than a credit card.

But if your goal is to get some free credit card rewards and your dealer will let you, there's no harm in charging what you can and then just paying it back right away. Those sweet rewards from this approach may just help you cover the cost of that first tank of gas.