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Buying a Car with a Credit Card

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By Harriet Meyer | Edited by Johanna

Updated January 2018

Do it right and credit cards are the cheapest way to borrow if you're buying a car (or anything else, for that matter). But you'll usually need a good credit rating and a high limit - and, crucially, for the car dealer you're buying from to accept cards.

And if you manage to tick all these boxes (which is rare), then you need to be disciplined about using the card and paying it off. We run down the pros and cons of paying by card, and tell you the best cards to pick.

This is the first incarnation of this guide. Please suggest any changes or questions in the Buying a car with a credit card discussion.

Not the car finance option you were looking for? Check these out...
Personal car loan Hire purchase Leasing PCP

Why should I use a credit card to buy a car?

Done right, it's the cheapest way to buy a car, and gives important extra protection. Done wrong, it can be an expensive nightmare.

If you use a credit card to buy a car, the ideal scenario is that you get the longest 0% credit card you can, whether that's a purchase card or a money transfer card, use it to buy the car, then pay off a set amount each month to designed to clear it in time.

This means the debt's cleared at the end of the 0% period - so you pay no interest, and the credit hasn't cost you anything.

It sounds simple, but there's a lot of pitfalls in that sentence, which won't make this a realistic option for many.

Firstly, many dealers won't accept credit cards. Or, some will accept them, but will only allow you to pay a limited amount. Since 13 January 2018, companies can no longer charge a fee for accepting credit cards - though it's possible some dealers will refuse payment by credit card as they can no longer pass on the processing fee.

It's also worth noting if you're using a credit card, you'll be limited in the amount you're able to spend - not many will give you a limit of more than £5,000, and most will be well below this.

If your credit score's very good, you may be able to get a little bit more, but almost certainly you'll need to be looking at a used car, or a very small new car to make paying on a credit card viable.

It goes without saying that you'll need a good credit rating to be able to get the top 0% deals.

However, matched against those pitfalls is a couple of very powerful tools...

You could save £500+ by using a credit card

Paying by credit card is usually the cheapest way - if you do it right. Here's how much you'd pay each year with the different ways to buy a £5,000 car, and how much each would cost you in interest:

Year 1 Year 2 Year 3 Year 4 Year 5 Total cost
26mth 0% card, then 36mth 0% balance transfer £1,011 £1,011 £1,011 £1,011 £1,011 £49
36mth 0% money transfer then 24mth 0% balance transfer £1,032 £1,032 £1,032 £1,032 £1,032 £165 (2)
Personal loan at 4.4% rep APR £1,110 £1,110 £1,110 £1,110 £1,110 £550
Hire purchase deal at 4.9% rep APR £1,130 £1,130 £1,130 £1,130 £1,280 (3) £800

(1) The only cost is the balance transfer fee incurred in year 3. (2)This cost is the initial money transfer fee, and then the balance transfer fee paid after three years. Costs are averaged over the five years, though minimum payment requirements may mean you pay more in the earlier years - this will depend on your card. (3) This includes an "option to purchase" fee of £150 paid at the end of the deal

Plus you get important extra protection too

Using a credit card to pay for your car may not only be the cheapest way to get new wheels; it also gives you Section 75 protection.

So what is this? Basically, buy something - in this case a car - anywhere worldwide, costing between £100 and £30,000 and pay for any of it (even just 1p) on a credit card and the card company is jointly liable with the seller. So if it's faulty or you don't get the service, you can go to the card firm for your money back.

Plus if retailers dispute your claim, you need go to court. With a card firm you can go to the free Ombudsman. It doesn't just look at the law, but also if you're 'being treated fairly'. See our guide to Section 75 for more info.

How does buying a car with a credit card work?

You must set up a monthly direct debit to meet at least the minimum payment with any credit card deal – or risk losing the promo 0% rate. But for large debts like this, it's best to set up the direct debit for the amount that will allow you to pay off the debt before the 0% period ends, effectively turning your credit card into a fixed-repayment loan.

To work out how much you will need to pay, divide the cost of the car you're planning to buy by the number of months your card has at 0%. If you can't afford this figure, then you either need to look for a cheaper car, or look into extending your 0% period...

Need more time to pay the debt off?

If your credit limit is higher, then this'll mean that you can buy a more expensive car. However, paying it off before the 0% ends gets more tricky the more you borrow.

Your answer could lie in Balance Transfer Credit Cards - you can pay a one-off fee to get another three-and-a-half YEARS at 0% to pay the car off.

One thing to be careful of: ensure that however many times you switch from 0% card to 0% card that you're not extending the debt out beyond the life of the car. There's nothing worse than still paying for something that you've sold off or scrapped.

Is paying for a car by credit card right for me?

There are so many different options when it comes to buying a car, it can be difficult to choose. So here are the main benefits and pitfalls of choosing to pay by credit card:

Pros
  • Do it right, and you get to borrow money completely free from all charges.
  • You get Section 75 protection meaning that the card company's jointly liable if something goes wrong.
  • If your 0% card also offers rewards, you can reap those from your large car purchase too.
  • You'll own the car from the very start (which you won't if you take dealer finance).
  • It's flexible as you can just make minimum payments if you're short of cash one month (though this is also a disadvantage!).
Cons
  • You may not be able to get a 0% credit card or 0% money transfer card - though our Eligibility Calculator will help you find out.
  • You may get a card, but not get a credit limit that allows you to buy the car you want.
  • If you're not disciplined in paying it off, that 0% debt can become very expensive - and unlike a loan, a credit card gives you the flexibility not to pay it.
  • The dealer might not accept cards or won't let you pay the full amount on a card.

Best BuysLong 0% deals

Buying a car on a 0% purchase credit card is one option - if you can get a large enough credit limit. You’ll avoid paying any interest provided you pay off the debt before the deal comes to an end. The 0% Card Eligibility Checker shows the best you can get, but here are the top deals (for more deals see our 0% Spending Cards guide).

MBNA - 29 MONTHS

Longest-ever 0% spending card

MBNA* – up to 29 months 0% (18.9% rep APR after)

This MBNA* card offers the longest ever 0% spending period. However, some poorer credit scorers may be accepted and offered fewer 0% months – though if our eligibility calculator shows you as pre-approved, you'll definitely get the headline deal.

Need-to-knows
  • We say 'up to' 29 months as some poorer credit scorers may get fewer months at 0%.
  • Make sure you fully clear the card(s) by the end of the 29 months or you'll be charged 18.9% interest on any remaining balance.
  • This card also offers balance transfers for up to 29 months at 0%, though you'll pay a 2.95% fee to transfer your debt to the card.
  • Always pay at least the minimum monthly repayment, or you'll lose the 0% deal.
Eligibility Calculator
(MSE's free tool)
APPLY*
(at lender site)

Protect your credit score and check chances of getting card

Stats box
  • Spending length: Up to 29 months 0% | Card issuer: Visa | Min income: N/A
  • Rep variable APR: 18.9% (see Official APR Examples)
  • Minimum repayment:Greater of 1% of balance plus interest, or £25
Sainsbury's card

Joint second-longest 0% and you get Nectar points on spending

Sainsbury's Nectar* – 28 months 0% (18.9% rep APR after)

Sainsbury's* offers the second longest interest-free period - a massive 28 months. Unlike the Tesco card below, if you're accepted you'll definitely get the full 0% period. Plus, you earn Nectar points on spending so could net a few when you buy your car.

Need-to-knows
  • New customers applying by 29 December 2016 will get 5,000 bonus Nectar points if they spend £800 in Sainsbury's in the first three months – but don't use this as an excuse to spend more than you normally would.
  • You get 2 points per £1 spent on Sainsbury's shopping and fuel, and 1 point per £5 spent elsewhere.
  • Make sure you fully clear the card(s) by the end of the 28 months or you'll be charged 18.9% interest on any remaining balance. Poorer credit scorers may get 21.9% or 28.9%.
  • You'll either get the full 28-month deal or you'll get rejected, unlike some cards in this guide where you may be accepted for the card, but given a shorter period at 0%.
  • Always pay at least the minimum monthly repayment, or you'll lose the 0% deal.
Eligibility Calculator
(MSE's free tool)
APPLY*
(at lender site)

Protect your credit score and check chances of getting card

Stats box
  • Spending length: 28 months 0% | Card issuer: Mastercard | Min income: N/A
  • Rep variable APR: 18.9% (See Official APR Examples)
  • Minimum repayment: Greater of 1% of balance plus interest, 2.25% or £5
Tesco* - 35 MONTHS, 2.7% FEE

Joint second-longest 0% spending card

Tesco Bank - up to 28 months 0%

This Tesco card also offers a 28 month interest-free period on spending. You'll also get Tesco Clubcard points on all spending so you could earn a few on your car purchase.

  • We say 'up to' 28 months as some poorer credit scorers may get 25 or 22 months 0%.
  • You get Clubcard points on your spending - 1 points for every full £4 spent at Tesco stores or petrol stations, 1 point for every £8 elsewhere.
  • Make sure you fully clear the card(s) by the end of the 28 months or you'll be charged 18.9% interest on any remaining balance.
  • Some poorer credit scorers could be given interest rates up to 23.9%.
  • Always pay at least the minimum monthly repayment, or you'll lose the 0% deal.
Stats box
  • Spending length: up to 28 months 0% | Card issuer: Mastercard | Min income: £5,000
  • Rep variable APR: 18.9% (See Official APR Examples)
  • Minimum repayment: Greater of 1% of balance plus interest, or £25
Post Office

Long 0% spending card

Post Office - 27 months 0%*

This Post Office* card offers 27 months 0% on spending, provided you make at least one purchase in the first three months. If you don't you'll only get the 0% deal for the first 16 months, which won't make it a good deal, so it's worth bearing that in mind - be ready to buy the car swiftly after you've applied.

Some of you have told us that when you apply it looks like there's a 0% period of just 16 months on spending but we've confirmed with the Post Office that as long as you make a purchase in the first three months, you'll get the full 27 months 0%.

Need-to-knows
  • You'll either get the full 27 month deal or you'll get rejected.
  • Make sure you fully clear the card by the end of the 0% period or you'll be charged 18.9% interest on any remaining balance.
  • Poorer credit scorers could get a higher interest rate, up to 22.9%.
Eligibility Calculator
(MSE's free tool)
APPLY*
(at lender site)

Protect your credit score and check chances of getting card

Stats box
  • Spending length: 27 months 0%
  • Rep variable APR: 18.9% (See Official APR Examples)
  • Card issuer: Mastercard
  • Min income: £8,000
  • Minimum repayment: Greater of 1% of balance plus interest, 2.5% or £5
Virgin Money

Long 0% spending card

Virgin Money* – 27 months 0% (19.9% rep APR after)

This card from Virgin Money* offers a decent 27 months 0% on spending, which you'll definitely get if you're accepted for the card – giving you more than two years to pay off your car purchase.

Need-to-knows
  • Our eligibility calculator can tell you if you're pre-approved for this card.
  • Make sure you fully clear the card(s) by the end of the 27 months or you'll be charged 19.9% interest on any remaining balance.
  • You'll either get the full 27-month deal or you'll get rejected, unlike some cards in this guide where you may be accepted, but given a shorter period at 0%.
  • Always pay at least the minimum monthly repayment, or you'll lose the 0% deal.
Eligibility Calculator
(MSE's free tool)
APPLY*
(at lender site)

Protect your credit score and check chances of getting card

Stats box
  • Spending length: 27 months 0%
  • Rep variable APR: 19.9% (see Official APR Examples)
  • Card issuer: Mastercard
  • Min income: N/A
  • Minimum repayment: Greater of 1% of balance plus interest or £25

Best BuysMoney transfer cards

If the dealer doesn't accept credit cards, or you need longer than 28 months at 0%, you can still pay using 0% ‘money transfer’ cards - it's just slightly more complex. These cards are best for loans of less than £5,000 or so, as you probably won’t get a credit limit much higher.

These cards work by shifting cash to buy the car from your new card to your bank account for a one-off fee, so you owe the card provider instead. It’s similar to taking a loan, but interest-free. Once the cash is in your account, you can use it to make a big purchase.

However, the big downside of doing it this way is that you don't get Section 75 protection, so factor this in when making your decision. If you can pay even a deposit directly on a credit card, and the rest this way, then you're covered.

WARNING! ONLY use cards specified in our guide to do this, and set up a direct debit to pay off the minimum monthly repayments. If you don’t, you’ll lose the promo rate and pay a whacking interest charge the debt (often 20%+). Try using another card to do a money transfer and the cost could be massive.

Money transfers are niche and rarely available, so there are few options on the market, but here are the best of them (our Money Transfers guide has the full low down).

Virgin Money Card

Cheapest money transfer fee on the market

Virgin Money* 32 MONTHS 0%, 1.69% FEE

This Virgin Money* card gives more than two and a half years at 0%, for a market-leading fee of 1.69%. As with other Virgin Money cards you'll definitely get the full 0% period if you're accepted, so if you can pay off your car 'loan' in 32 months it's a good option.

Need-to-knows
  • After the 0% deal ends if you've still got a balance on the card, you'll pay 20.9% interest a year on it, so budget to pay off within the 32 months.
  • This Virgin card also offers 0% on balance transfers for 32 months, with a 1.69% fee.
  • If you do a balance transfer, you'll pay interest of 18.9% a year on any remaining balance.
  • Always pay at least the minimum monthly repayment, or you'll lose the 0% deal.
Eligibility Calculator
(MSE's free tool)
APPLY*
(at lender site)

Protect your credit score and check chances of getting card

Stats box
  • Money transfer length & fee: 32 months 0%, 1.69% fee (min £3)
  • Annual interest rate on money transfers after the 0%: 20.9%
  • Representative variable APR on spending: 18.9% (Official APR Example)
  • Card issuer: Mastercard
  • Min income: N/A
  • Min repayment: Greater of 1% of balance plus interest or £25
  • Any restrictions? Must transfer within 60 days
mbna

Longest money transfer card

Virgin Money* 36 MONTHS 0%, 2.39% FEE

This Virgin Money* card gives three years at 0% on money transfers, with a fee of 2.39%. So if you'll need 36 months to pay off your car 'loan', it could be the best option. Plus, if you're accepted you'll definitely get the full 36 months at 0%.

Need-to-knows
  • You must do your money transfer within 60 days of opening the card to get the 2.39% fee; after this, the fee rises to a massive 5%.
  • In addition, this card offers 0% balance transfers for 36 months, with a handling fee of 2.39%.
  • You'll pay interest on any remaining money transfer balance at a rate of 20.9% after the 0% is over.
  • Always pay at least the minimum monthly repayments or you'll lose the 0% deal.
Eligibility Calculator
(MSE's free tool)
APPLY*
(at lender site)

Protect your credit score and check chances of getting card

Stats box
  • Money transfer length & fee: up to 36 months 0%, 2.39% fee (min £3)
  • Annual interest rate on money transfers after the 0%: 20.9%
  • Representative variable APR on spending: 18.9% (Official APR Example)
  • Card issuer: Mastercard
  • Min income: N/A
  • Min repayment: Greater of 1% of balance plus interest or £25
  • Any restrictions? Must transfer within 60 days

Buying a car with a credit card Q&A

  • Why don't some garages accept credit cards when buying a car?

  • What if I can’t get a large enough credit limit?

  • I’ve got lots of cards. Should I take out another one to buy a car?

  • What if I’m rejected for a card?

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