Can I buy a car with a credit card?

A credit card might seem like an unusual way to buy a car, but it works for some people. Our guide explains what to consider and where to find the best credit cards for car purchases. We also look at other ways to finance a car if a credit card isn’t right for you.

Can I use a credit card to pay for a car?

Yes, some dealerships accept credit cards for car purchases. Make sure you have enough available credit — this is the amount you can spend without hitting your credit limit. Using too much of your available credit can affect your credit score negatively so try to pay down your card quickly.

Always use your credit card responsibly. Make at least the minimum payment on time each month and stay within your credit limit to avoid penalty fees and defaulting. Only borrow what you can afford to repay.

How does buying a car with a credit card work?

Buying a car on your credit card is a bit different to everyday purchases. Cars are usually a larger purchase so you may need pre-approval from your card provider. Some car dealerships have transaction limits so you may not be able to put the full cost on your credit card. Some dealerships charge a 2–3% fee for credit card payments, and some don’t accept credit cards at all.

If you need a credit card for a car purchase you can search cards with Experian. It takes less than two minutes and you can see your best offers all in one place, without affecting your credit score.

Can I borrow cash from my credit card to buy a car?

It’s possible, but expensive. Lenders generally charge a higher interest rate and a 2-3% fee on cash advances — although it’s often cheaper with a money transfer card. Cars bought wholly with cash aren’t protected under Section 75, even if the cash came from a credit card.

Is paying for a car with a credit card a good idea?

It depends on a few things including how quickly you can pay the balance and if you have the right credit card for the job. Below are some pros and cons to consider.

Possible advantages

• Purchase protection. Most credit card purchases between £100–£30,000 are covered under Section 75 of the Consumer Credit Act. This means you can claim your money back from the lender if the retailer doesn’t honour the sale (such as by misrepresenting the car’s condition). The full purchase is protected even if you only pay the deposit on a credit card.
• Interest-free offers. It’s possible to avoid paying interest with a 0% interest card. You should aim to clear the balance before the 0% period ends otherwise you’ll start paying interest at a high rate. These cards often have fees and can be hard to get.
• Rewards. It’s possible to earn points, air miles or cashback when you pay for a car on a rewards credit card. There’s often an annual fee for these cards.
• No early repayment fees. Unlike loans, credit cards let you repay the balance anytime without penalty.

Possible disadvantages

• High interest rates. Outside of promotional periods, credit cards generally have higher interest rates than loans and car finance. Interest adds up quickly on a large purchase unless you pay it off within the grace period (usually 21-55 days).
• Lower borrowing amounts. Lenders give their highest credit limits to people with excellent credit scores and higher incomes. Depending on your financial situation, you may be able to borrow more with a loan or car finance.
• Credit score impact. Your score dips when you apply for a credit card although it should recover if you take care of it. Getting closer to your credit limit can also hurt your score, so aim to pay off your balance quickly.
• Dealership fees and limits. Some car dealerships charge for credit card payments or limit how much you can put on a card. Others don’t accept credit cards at all.

What’s the best credit card for car purchases?

The best type of credit card for a car purchase depends on things like when you plan to pay off the balance and your eligibility for certain offers.

If you want to spread the cost of your car over time you can save money with a low annual percentage rate (APR). If you have a decent credit score you may be eligible for a 0% introductory period on a purchase card. Try to pay off your balance before the 0% period ends and you’re put on a high rate.

If you plan to pay off the purchase quickly consider a card that lets you earn perks like cashback or air miles. There may be an annual fee so make sure the benefits outweigh the cost. These cards typically have high interest rates meaning they aren’t suitable for longer-term borrowing.

Check your eligibility for cards before applying. You’ll typically need a good credit score to get rewards, 0% offers and high limits. Lenders may also want to see a higher income. Make sure the credit limit you’re offered can cover your planned purchase — whether for the car’s full price or just the deposit.

Experian calculates your eligibility when you compare cards, so you can apply with confidence. Comparing is free, takes less than two minutes and won’t affect your credit score.

What are the alternatives to using a credit card to buy a car?

If you don’t want to use a credit card to buy a car, here are some different types of car finance to consider.

• A car loan. Basically a personal loan used to buy a car outright. Loans tend to have lower rates than cards although you’re unlikely to find 0% loans. One big difference between loans and credit cards is cards have flexible payments, while loan payments are the same each month and there’s a fee for repaying your loan early.

• Personal Contract Purchase (PCP). Tends to suit people who change their car often. You’ll put down a deposit and make monthly payments to cover interest and the cost of depreciation (the value the car loses). When the contract ends you have three options — buy the car, swap it or return it. There are fees for damaging the car or going over your mileage limit. Interest rates can be high, but some people are eligible for low or 0% APR offers.

• Hire purchase (HP). Helps you buy a car over time. You’ll put down an initial deposit and make monthly payments towards the cost of the car. At the end of the contract, you’ll usually pay a final £100-£200 fee to take ownership. HP is secured against your car meaning the lender can take the vehicle away if you stop paying them.

• Car leasing. Lets you use a car but not own it. How much you pay each month depends on things like the car’s value, contract length and mileage allowance. You may need special insurance to cover any damage to the car.