Putting a car down payment on a credit card can allow you to earn credit card rewards and can sometimes help you save on interest.
Get to know how to make a Down payment on a Car With a Credit Card as we unveil various tactics on how to go about it.
Putting a car down payment on a credit card can allow you to earn credit card rewards and can sometimes help you save on interest. However, auto dealers may limit the amount of a car’s purchase price you can charge.
Reasons to Buy a Car With a Credit Card
There are lots of reasons it might make sense for you to use a credit card for a down payment when you purchase a vehicle, including the following.
1. You Can Earn Credit Card Rewards
Down payment requirements vary depending on whether you’re leasing, buying new, or buying used.
Some lenders want you to put as much as 20 percent down on the total price of a new vehicle because the car depreciates so much in value.
This could mean your car down payment is several thousand dollars. If you have a cash-back credit card or reward credit card, it can be an enormous benefit to put a down payment on your card.
2. Your Credit Card Company is Offering a Low APR
Many credit card companies make special introductory offers, such as a 0% annual percentage rate (APR) for purchases made in the first 18 months.
If you can get a card offering 0% and you charge your down payment, you won’t pay any interest charges. This can provide significant savings, especially since auto lenders may give you less favorable rates on the entire amount you borrow.
Check Out When to Buy a Car With a Credit Card?
What to Consider When Buying a Car With a Credit Card
Before you swipe or tap your credit card for your next car, take these things into consideration to avoid costly mistakes.
1. Cost of Interest Payments
It’s important to consider the cost of interest payments and fees when purchasing a car with a credit card, which has a higher interest rate compared to a bank loan.
If the plan is to pay the car off over time, you might save lots of money in interest by going with a traditional bank loan.
2. The Size of Your Credit Limit
The credit limit on your card usually depends on your income and credit scores, as well as other loans and credit card balances.
If you want to put an entire car purchase on your card, make sure your credit limit is high enough to cover it. It may be more realistic to put a down payment on the card or pay for only a portion of the total.
3. Working With Car Dealers’ Policies
Every car dealership operates a little differently from one another. Some will accept credit cards, some won’t. Those that do charge you more — up to 3% — to cover card processing fees.
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