These days, people use credit cards to purchase just about anything — including automobiles. This week, I answer questions from two people considering purchasing a car on plastic.
As you’ll see, buying a car with a credit card can involve risks.
I have a business credit card with a regular annual percentage rate, not introductory, of 7.9 percent, and the loan rates I’ve researched range from about 6.5 percent to 9.1 percent depending on whether I buy from a dealer or a private party. If I purchase the car with my credit card, I would make regular payments for as much as the loan payment would have been.
If I were to go with a traditional loan, I would opt for a five-year loan to keep the monthly payments low. I also would plan to pay off the remainder of the loan with a lump sum in about two years.
Do you have any advice about which approach to choose?
But if you can get a five-year regular car loan at a rate lower than the credit card, that’s still the way I would go. That way, you would not use up your liquid credit on the card, leaving it open for use in emergency situations.[[ Auto Loan Calculator ]]
My parents gave me a credit card to use and I’d like to use it to purchase a used car. The credit card I have charges 5 percent. What do you think?