Buying a car with a credit card makes sense if…
You’re using a card with 0% interest on purchases.
With a 0% interest credit card, you could secure zero interest on your purchase for anywhere from nine to 21 months. If you charge $5,000 on a card that falls into this category, you could feasibly pay that portion of your car loan down during that time without paying a dime in interest charges.
However, before you go this route, you should make sure you can afford to pay off your car fairly quickly. If you don’t pay off your charged balance during your card’s 0% APR promotional period, you’ll wind up paying credit card interest when your card’s rate resets — which is going to be far higher than the rate you’d receive on a good car loan.
You want rewards and have the cash to pay it off.
Let’s say you’re buying a relatively cheap car, to begin with, and you have the cash on hand. By paying for an inexpensive car with a rewards credit card and paying off the balance right away, you could earn valuable rewards without much effort on your part. Since most rewards credit cards offer kickbacks worth between 1% and 5% of a purchase, you could benefit handsomely with this one small move.
Your credit is good.
With good credit, you can qualify for a credit card that may make charging your car purchase worthwhile. As mentioned above, zero-interest credit cards offer an excellent opportunity to avoid paying interest on at least part of your purchase. If you’re in it for the rewards, on the other hand, the best travel and rewards credit cards are usually only available to individuals with a FICO score of 720 or higher.
So, if you don’t have an awesome 0% APR or rewards credit card already, don’t despair. With a little research, you can apply for a great credit card before you walk into a dealership.
What’s more, some of these cards offer huge sign-up bonuses worth hundreds of dollars to new cardholders who meet certain spending criteria — for example, making $3,000 in purchases on a new credit card within the first 90 days. Charging part of your car purchase is a surefire way to meet those requirements in one fell swoop — as long as you can pay it off.