Although not all dealers will accept credit cards, research indicates that about one in 20 car buyers are using their plastic to buy their car. The main advantage of using a credit card over another form of car finance is that you can avoid paying interest altogether by choosing a card that offers 0% on purchases for an introductory period and paying it off within that time frame. Buying a car on a 0% credit card may be cheaper than other forms of finance. The catch of course, is that you’ve got to pay it off within the 0% period. Furthermore you need to have a big enough credit limit to pay for the car. If you are planning to use an existing credit card but your credit limit is not high enough to cover the full cost of the vehicle you want to buy, it is worth contacting the card provider to ask for it to be increased.
Many credit card funders offer 0% on balance transfers and purchases. You can also avoid paying interest charges altogether by changing yourcard at the end of interest free periods. If you are planning to borrow interest-free using a 0% card, it is also worth keeping in mind that you will face a high interest rate on anything you have failed to pay off within the 0% term.
Here are some of the advantages and disadvantages of paying for your car with a credit card.
- Zero Percent Interest – The main advantage of buying a car on credit over other forms of car finance is that you can completely avoid paying interest altogether by choosing a credit card that offers 0% on purchases for an introductory period and paying it off within that time frame. This is the next best thing to paying for the car in cash.
- Extra Protection – When you buy your car on credit, you could get perks such as extra ID fraud protection, extended warranty, cashback and cheap holiday spending. Many credit cards offer a purchase protection system, meaning if you buy goods on the card and it is lost or stolen within a set time – usually about 90 days – you can get the money back from the credit card company.Even if you already have the cash to pay for your new car, using a credit card offering rewards to make the purchase – and then paying the balance off in full within the next month – could prove a very savvy move.If the company goes bust and you can’t contact it about problems or any other issue, you have exactly the same consumer rights with the card company as you do with the retailer to get money back or compensation.So if you’re ordering something as expensive as a car, you should put it on a credit card for safety. It is always important however, to ALWAYS pay it off in full to avoid interest.
- Not All Dealerships Accept Cards – The main problem you will have when trying to pay for your car by credit card is that not all dealerships accept this form of payment, and you may have to shop around for those that do. Don’t let this deter you though. A car is an expensive purchase. If you have the cash available and you’re confident that you can pay off the balance in full, doing a little research to find the right dealer can save you a fortune.
- Will Your Credit Limit Cover The Cost Of The Car? One of the most important things to consider is whether your credit limit will actually cover the cost of the car. If this happens to be the case, it is worth contacting the card provider to ask for it to be increased. If this happens to be the case, you could still do this if you have enough savings to make up the difference. The most important thing though, is to ensure that you are able to pay off the full balance within the zero percent periods so that you get the full benefit of 0% financing.
- Beware The Interest Rate – If you plan to borrow interest-free using a zero percent interest card, it is important to keep in mind that you’ll face a high interest rate on any balance that you have failed to clear off within the 0% period.
- New Credit Applications – Every time you apply for new credit, it will have an impact on your credit score, and thus your ability to get further new credit. However as long as you’ve got a good credit history there’s no need to be unduly worried. If you don’t have a stellar credit card history, always concentrate on using your credit score to cut your interest costs.