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Car Finance Expert Q&A

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Edwin Miles. Underwriting Manager

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Can you buy a car on a credit card?

Hi Edwin, i'm thinking of buying a car and using a credit card has crossed my mind. What are the advantages / disadvantages of purchasing a car with a credit card?

I've got decent credit and could potentially get a car loan but wanted some expert advice before i went ahead with my purchase. What are your thoughts? Linda

Posted by Linda Burns on

Answer.

Hi Linda, thank you for your question and an interesting one it is indeed!

You can of course purchase a car on a credit card and an increasing number of people (approx 1 in 20) are using this method of finance. There are of course pros and cons of using your plastic to purchase a car. We'll start with the pros!

The main advantage of using a credit card is that you can take advantage of the 0% interest free period that most providers offer today. This enables you to save up the amount you paid for the car over a 12 - 18 month period and then clear the balance once the interest free period comes to an end! This way you have paid no interest on the amount you have borrowed. Using a credit card can also offer extra protection when it comes to buying a car.

Spend between £100 and £30,000 and you are protected by the Consumer Credit Act should the business supplying your car go out of business before they have actually delivered the car to you. Finally using a credit card can also provide you with rewards from the card supplier - things like cash back, air miles and vouchers can be taken advantage of.

The disadvantages of using a credit card to buy a car are as follows. Firstly, not all dealers accept credit cards and if they do they may only accept up to £2000 to £3000 for example. You may also have a credit limit for each purchase so this needs to be checked with your credit card provider. It may make sense to use your plastic for a small chunk of the cars value however taking out a car loan may well be a better and cheaper option.

The best rates on car finance are obtained between the values of £7500 to £15000 and if you aren't 100% of clearing the balance on your credit card before the interest free period comes to an end it may well make sense to finance the vehicle value via car finance as credit cards charge from 19.9% APR per month on your credit card balance. Car Finance deals can be obtained from as little as 5.9%. Lastly, if you haven't got your credit card on hand and ready to go you face the concern over whether you will be approved for the limit you require on your credit card application. This does sometimes catch people out and leaves people disappointed.

So there you have the pros and cons of using a credit card to buy a new car. If you decide not to use a credit card and wanted to use car finance instead please make an application with us and once accepted we provide a no obligation quote and you can buy a car from any dealer. Have a good evening. Edwin

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