Here are two huge benefits to buying a car with a credit card (even if it’s just a minimum payment).
Get the benefits of this method when buying from a dealer, but a private seller won’t have the facility.
Firstly – if you have a great credit rating, you have access to zero per cent lending and a high credit limit.
Second – paying even a small percentage of your car with almost any type of credit card provides an extra layer of insurance (a guarantee stipulated under the Consumer Credit Act).
Some credit card companies offer the best car finance deal in the UK
0% Credit cards let you buy a nearly new or used car, interest-free, for a set period.
Your credit card company may have an introductory offer at zero percent, but providers like Virgin or MBMA offer 5k or 10k zero-interest lending for a set period. You’ll need to apply and find out what your credit limit offer is, but each lender differs in the amount they will lend and the maximum period to pay back the loan.
The trick is to:
- Make at least minimum monthly payments
- Pay off the card in full or
- Balance transfer to another provider before the zero-interest period expires.
Lender periods range from one to 30-months. If you plan and make at least a minimum monthly payment, you can borrow some if not all the upfront cost to buy a car, interest-free.
The only associated costs are a one time set up or admin fee and one-time balance transfer fee if you move an outstanding amount to a new provider.
Yes, buying a car on credit card means you can borrow some or all of the money without paying hefty Annul Percentage Rates (APR).
Check out guide on how to buy a car with outstanding finance on it.
Credit card protection, used cars
It’s a bit like having two used car warranties!
Paying for a fraction of your new car on credit card provides a second layer of protection should you hit mechanical issues or some unforeseen incident.
This method is a powerful one because you get a back up via the standard warranty provided by the dealer at the point of purchase. You also become insured under the Consumer Credit Act Section 75 as the credit card issuer incurs a liability as part of their agreement to provide credit.
- The vehicle must cost between £100 and £30,000.
- You must buy the vehicle either in full or partially using a credit card.
If the worst happens, both the dealers and the credit card provider (lending company) are equally liable.
Car dealers that accept credit cards
Not all second hand car dealerships allow you to pay any part of your new car purchase using a credit card.
It’s annoying because they could if they wanted. Merchant services levy a charge on credit card purchases, and the dealer needs to pay (anywhere from 1.5% to 5% of the total amount).
Traders and credit card purchases
Since January 2018, credit and debit card surcharges became banned. Businesses may continue to charge customers an administration or booking fee, provided it applies directly to other forms of payment. Business credit and debit card are not part of this ban and may still be charged.
Merchant Services demand a flat fee on credit cards transactions (i.e. 3.5% of the amount charged).
If you buy a car for £8,000 and the credit card admin fee is 3.5%, the dealer will pay £280.
We are saying, if a dealer refuses to accept credit card as a payment method, consider offering to cover the 3.5%. The dealer gets paid, and you get your extra layer of insurance and zero interest rates.
It can work if the dealer adds the admin fee to the sale price of the car.