Should You Charge Your Car?

When you go to the dealer to buy a new car, is it a good idea to charge the purchase on your credit card? Most people would think "No way!" In reality, though, it depends on what kind of credit card you have.

Accruing large amounts of credit card debt is never a good idea, but if you can pay off the car relatively quickly — like before you have to pay interest on the lump sum — then it could be a good opportunity to collect all kinds of credit awards. You might bag enough frequent flier miles to take that Fiji vacation you've always dreamed of.

Dealers obviously won't like that you're paying with a card and will try to jack up the price to compensate. Remember, they lose a 2% transaction fee, plus miss out on any incentives for arranging the vehicle's financing through the automaker's credit arm, which will instead be handled by your credit card company.

It's best to negotiate the price first, then whip out the credit card. The dealer may balk, but if you have a copy of your cardholder agreement and stay on the offensive, there's not much to be done. Any business that accepts credit cards doesn't have a choice about the amount of money that can be charged to it. If the dealer continues to stonewall, simply insist that you will take your complaint to the credit card company and they will have no choice but to back down.

Then all that's left is to find out when monsoon season is over in Fiji.

New Car? Put It on the Credit Card (The Consumerist)

Comments

When you have cash to pay for the car, it's definitely a good idea to charge it. Many cards even offer some kind of extended warranty with purchases, although I'm not sure it would cover a car. But that mostly doesn't matter if you're buying a new car: Most dealers won't let you charge over $3000. Believe me, I've tried several times. I typically have to resort to simply charging the max that they will allow and then paying cash for the rest.

Any dealer I've dealt with has a max amount chargeable. Is this legal?

I was told by a dealer that they have been burned by credit card transactions in the past. Someone stealing the number and a person's identity drive away in a new car. As result, limit the amount of the transaction.

Retailers have to pay a percentage of the charge to the credit card company for processing fees- sometimes as high as 2.5%. This is probably the reason for the limit.

I tried to do this with my last car but the dealer said they didn't accept credit cards because of the fee the credit cards charge. I just ended up getting checks for my credit card - which the bank was all too happy to send me - and wrote the dealer a check but it still went on my credit card.

You can't fault the dealer. They get charged a percentage of the credit card transaction, the same way that any retailer does.

2.5% of $30,000 = $750.00

Not the kind of expense most businesses are going to needlessly accept. Especially when you consider that most people that can put a car on a credit card can just as easily write a check for the thing. They just want to get those extra rewards (at the dealer's expense, whether they know it or not).

Either the dealer foots the bill or they pass it on to you on top of the sale price.
The easiest thing to do is to say "No, we can't accept a credit card."

Discover card used to have no limit on monthly spending on auto and gas purchases. And you could simply charge $1200 top on that and charge the rest on other cash rebate cards.

(I did so with my Citi card and got 1% out of a few thousand dollars down payment I put down)