Can you buy a car with a credit card?

January 12, 2024 by

Paying for a car with a credit card isn’t especially common, but it is possible. The question is, should you? This article will walk you through the pros and cons of paying for a car with a credit card, as well as how to do it.

What are the benefits of using a credit card to buy a car?

Not many people buy a car with a credit card, however there are a few perks to doing so. Ideally, you’d find the longest 0% interest credit card you can and use it to buy the car. You would then divide the amount the car cost by the number of months you get interest free and pay off enough per month to clear the debt in that period. And don’t forget, Carwow can help you find your new car for the best possible price with our new car configurator and network of trusted dealers.

For example, let’s say you bought a car for £10,000 and you get 12 months interest free on your credit card. If you pay off at least £833.33 per month, you won’t pay any interest on the loan.

Credit cards also offer protection should you have any issues with the car or the dealer you bought it from. Your card provider shares responsibility with the company you bought the goods from under Section 75 of the Consumer Credit Act. This means they can provide you with a refund on purchases between £100 and £30,000.

You also have more flexibility with a credit card. You can pay less per month if you’re low on funds at any point, as long as you pay the minimum monthly repayment.

What should you consider before buying a car with a credit card?

The main thing to think about before deciding to buy your car with a credit card, is that not all dealers will accept this method of payment.

This is because they are charged a card handling fee for taking payments this way, and they’re not allowed to pass this cost on to you. If you are set on a car from a dealer that doesn’t accept credit cards, it’s worth exploring other finance options.

You might not be able to get a card with a 0% interest rate if you have a bad credit history, and the standard interest rate on credit cards is around 10-15% which is more than the rate on most loans.

It’s also rare to find a credit card with a limit high enough to buy a car outright, with most cards having a limit of £5,000. Plus, you have to be disciplined enough to pay it back on time. If you don’t, the debt can get expensive once the 0% interest period ends.

How to pay for a car with a credit card

You may have to get permission from your card provider before making such a big purchase on your credit card. Once you’ve done this, paying for the car should be just like paying for anything else.

You’ll then want to set up a direct debit to pay chunks of your credit card debt each month. You’ll have to pay at least the minimum monthly payment, however it’s best that you pay enough to clear the debt within your 0% interest window to get the benefits of using the credit card.

Alternative ways to buy a car

There are plenty of ways to finance your next car without using a credit card. Two of the more common ways of paying for a car are PCP and HP finance.

Personal Contract Purchase (PCP) works by taking an initial deposit, before a series of monthly payments. With PCP, you don’t own the car at the end of the agreement. You can either make a final ‘balloon payment’ and keep it, or trade it in for a new model.

A Hire Purchase (HP) also consists of an initial deposit followed by a series of monthly payments. At the end of a HP agreement you’ll own the car and can do what you wish with it, whether that’s trade it in, keep it or sell it on.

You could also lease your next car. This is basically just renting your car over a long period of time, usually two to four years. You pay a deposit and a monthly instalment before giving the car back at the end of the agreement.

Cash is always an option too. Owning your car outright from the start removes the hassle of monthly payments and interest rates. However, if you can’t stretch to paying that much out at once, you could get a bank loan to pay for the car.

Buy your next car with Carwow

If you want the easiest way to get your next car at a great price, take a look at carwow. Simply head over to the configurator and build the ideal car for you.

Once you’ve done this, our trusted dealers will come back to you with the best offers for the car you want. You can then choose an offer that suits you, and a lot of dealers will deliver the car straight to your door.

You’ll be able to find a payment method to suit you, whether that’s cash, HP, PCP or leasing, you’ll be able to find a deal to fit your needs.