You own the car: When you finance a vehicle with an auto lender, it technically owns the car until you pay off the balance. But if you use a credit card, you’ll get the title from the start. What’s more, you can choose how much insurance coverage you want on the car — in contrast, if you have a lender, it will likely have some minimum requirements.

That said, buying a car with a credit card may not be the best choice for many people. Here are some potential reasons to avoid it:

Credit card APRs are higher: In most cases, the interest rate on a credit card will be much higher than that of an auto loan. If you expect to need several years to pay off the debt, you’ll save a lot of money by choosing an auto loan over a credit card.
Repayment terms work against you: With an auto loan, your repayment schedule is set from the start, so you’ll know exactly when your balance will be zero. With a credit card, however, there is no set repayment period. Instead, you’ll just get a minimum monthly payment. If you only pay that amount, you may end up taking years longer to become debt-free.
It could hurt your credit: Putting a large purchase on a credit card could spike your credit utilization rate—the percentage of your available credit that you’re using at a given time. The higher your utilization rate, the more it could potentially hurt your credit score. So, if you put a large purchase like a vehicle on a card and take a while to pay it off, your credit score could decrease and stay down for much of that time.

HOW TO FIND THE BEST CREDIT CARD REWARDS

Are car down payments via credit card accepted?

Yes, if the dealer allows you to use a credit card, it doesn’t matter whether you’re buying the car outright or simply putting money down. In fact, because of dealer policies, it’s more likely that you’ll only be able to put money down than you are to buy the whole vehicle.

Laura Longero

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