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.

Dear Terry,
I am trying to decide whether to use a credit card or obtain an auto loan for the purchase of a relatively inexpensive used car (about $5,000).

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?

Derek

Dear Derek,
If you stick to your assumptions — and don’t miss any payments or have overdrafts that cause the credit card company to raise the interest rate to ridiculous levels — it may make sense to charge it.

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 ]]

Dear Terry,
I want to purchase a car with a credit card because I have poor credit. When I went shopping for a used car, the banks gave me a 15.9 percent loan rate. But to me that is way too high.

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?

Diana

Dear Diana,
I’d double check that interest rate on the credit card. It’s unlikely that the rate would be that low if you were to take a cash advance to buy a car. Also, check the card agreement — many contain language that says the issuer can raise the interest rate considerably if even one payment is missed, which could make a car loan really expensive.

If you have a question for Terry, e-mail him at Driving for Dollars. Save money on your car — sign up for Bankrate’s new weekend Car & Money newsletter.