Whether you buy new or used, buying a car at a car dealership is not always the best experience. You can improve the experience by earning some points in the process. Unfortunately, this isn’t always easy or straightforward, but we’ll try to make it as simple as possible for you.
Can you use a credit card to purchase a car?
Any business that accepts credit cards is called a merchant and in order to accept credit cards a merchant has to agree to the terms and conditions of the credit card network (i.e. Visa/Mastercard and American Express). Our interpretation of the merchant agreement is that Visa can set a minimum in order to use a card but cannot set a floor. For example, a store may indicate that you need to spend at least $10 in order to use a credit card. That’s about the extent of the limits that merchants can impose upon consumers. They cannot exclude certain items and they cannot set ceilings. So if you accept credit cards for a $100 item, you cannot refuse it for a $1,000 item.
All car dealerships accept credit cards as they have a parts and service department. However, these same businesses do not always allow car buyers to use a credit card or they impose limits despite this being a violation of their merchant agreement. You could complaint to Visa but then the car dealer could just refuse to sell you anything so you probably won’t really accomplish anything. Just remember that they need your money more than you need their car (except perhaps in 2021 and 2022).
Since dealerships violate this policy, you’ll run into different experiences at each dealership. In other words, your mileage may vary (pun intended).
How to handle this at the dealership
Unfortunately, there is no way to know if a dealership will accept a credit card and if so, how much they will accept until you’re at the very end. This can be time consuming and draining so we suggest that you educate yourself as much as possible ahead of time. Walking into a dealership and deciding what car you want and then buying the car right then is not a great way to go. Do all your shopping and research first. Test drive a few cars and then leave. Settle on an exact car. Find a few dealerships that have that car and don’t be afraid to travel a little bit. Call in advance because the inventory on the website isn’t always accurate. Start at the dealership with the lowest price.
Since you already know this is the car you want, you don’t have to waste time with test drives and things like that (of course, you can test drive the car after you have all the terms agreed upon just to make sure there are no issues). You look at the car, confirm that’s what you want and get right down to it. Under no circumstances should you tell them that you want to use a credit card. Agree on ALL terms. Purchase price, financing, warranty, car mats, wheel locks, everything. Get to the final price with nothing left to discuss. Again, being educated ahead of time and knowing exactly what you want will help speed up this process.
When you get down to the payment, you must tell them that you want to put a certain amount on a credit card. You’re going to run into two scenarios. The most common is that they have a max of $5,000. Who settled on this number and why it is so common is unknown but that seems to be the near universal number although a handful are more and less. Others will say no credit cards at all. But like anything else at a car dealership, everything is negotiable. How you handle this is up to you. Do you set an amount and draw a line in the sand or do you set a higher amount and then come down to a number? That’s up to you. If you can get anything above $5,000, you won.
You MUST be prepared to walk out. Remember, they want your money more than you want the car. You may also tell a little white lie about John from XYZ dealership a half hour away that said that they’ll take $10,000 on a card. Do you think they’re really gonna call John? Don’t feel bad, they probably lied to you at least a few times and they are violating Visa’s merchant agreement. You may have to call their bluff and literally leave. Remember, you can always walk back in 15 minutes later or you can call dealership number 2 and say “I’m at this other dealership and I’m willing to buy this car right now for X dollars with Y dollars being put on a credit card. They only want to do $5,000, if you’ll match the deal and take $7,500 on a card I’ll be there in 20 minutes. I’ve done something like that before. I was told no and then they called back in 10 minutes with a yes.
So why not just tell them up front that you want to use a card? Because they’ll find some other way to jack up the price. One helpful thing to tell them is that they’ll probably pay 2% on that extra $2,500 (since they were prepared to accept $5000) which is just $50. Do they really want to lose the sale over $50? Yes, the amount might be closer to 3% but let them tell you that. Even at 3% it’s just $75. Sometimes when you point out how small that number is they realize that you have a great point and that in the overall scheme of things, losing $50 on a sale means nothing to them at all.
Which card to use?
So you agreed on a car and they’re willing to take enough of the purchase price on a credit card to make you happy. What card should you use? There really is no one card to use since most cards will only give you 1x on a car purchase. The Chase Freedom Unlimited will give you 1.5x. Not that exciting. You may have a card with a sign up bonus that includes 2x on everything (Hyatt personal for example). This is still pretty boring. So now what?
The best thing you can do is find a card with a big SUB so you can knock out all or most of the spending requirement in one shot. My absolute favorite for something like this is the Chase Business Ink Unlimited. As of right now, you’ll get 75,000 points after spending $6,000 in 3 months. You’ll also get 1.5x. So let’s assume they dealership accepts $6,000. You’ll earn 75,000 for the SUB and 9,000 for the spending for a total of 84,000 points. Since we know that these points are worth 2cpp we can multiply 84,000 by 0.02 for a total of $1,680! That’s pretty good for buying a car right?
But wait, there’s more! Not only does this card have no annual fee, but it also has 0% APR for 12 months. That means that you’ll only have to make minimum payments on that $6,000 for 12 months. I suggest taking that money and putting in a high yield savings account. At 4%, you’ll earn $240! Who doesn’t love free money?
You could of course use other cards but just make sure you don’t choose a card like the Chase Freedom Unlimited personal card which has a very small SUB and spending requirement. You really want to focus on something with a big spending requirement so you can knock it out immediately. That’s the best return on investment since you can move onto your next card faster.
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