auto

Drawback of using credit card to buy car

Dear Terry,
What are the drawbacks of utilizing a low life of the balance APR offered by credit cards to buy a car? I have received multiple advertisements for credit cards with low introductory rates on purchases and low (3.99 percent to 4.99 percent) APRs for the life of the loan on balance transfers. Can these low APRs be used for car loans? Why use a 7 percent or 8 percent APR car loan when this type of option is available?
-- Larry

Dear Larry,
It sounds like a good deal but in practice using credit cards to buy cars is fraught with pitfalls. Most of these "low APR" credit card offers have a lot of loopholes. The introductory rate can rise after a few months and can hit 21 percent or more. Also, the life of the balance offer often applies only to balances you roll over from competing credit cards and not to new purchases or cash advances, under which buying a car would fall. Lastly, even if you had a card that promised a life of balance offer that would encompass a car purchase, there often are caveats, such as if you're late with one payment the balance can be jacked up to the highest rate allowed. Or, thanks to a common clause called Universal Default the credit card can jack your rate sky high if you are late with a single payment to some other credit card. Conventional auto loans, secured by the vehicle financed, are still the best and cheapest way to go short of paying cash.

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