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Buying a Car with a Credit Card

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By Harriet Meyer | Edited by Johanna

Updated April 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 Ė 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 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. Youíll 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).

Virgin Money - 30 MONTHS

Longest 0% spending card

Virgin Money* Ė 30 months 0% (18.9% rep APR after)

This Virgin Money* card offers the longest 0% spending period, and if you're accepted you'll definitely get the full 30 interest-free months.

Need-to-knows
  • Make sure you fully clear the card(s) by the end of the 30 months or you'll be charged 18.9% APR 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
  • Spending length: 30 months 0% | Card issuer: Mastercard | Min income: £7,000
  • Rep variable APR: 18.9% (see Official APR Examples)
  • Minimum repayment: Greater of 1% of balance plus interest, or £25
Sainsbury's card

Long 0% and possible £25 bonus Nectar pts

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

This Sainsbury's* card offers a long 0% period, and if accepted you'll definitely get the full 28 months. You'll also earn Nectar points on all spending.

Plus, you'll get 500 bonus Nectar points worth £2.50 each time you spend £20+ in Sainsbury's in the first two months from receiving your card (max 5,000 points, worth £25). Doing a big shop? You can split it into smaller £20 chunks to max the bonus, getting 500 points on each transaction.

Need-to-knows
  • New customers applying by 30 Jul 2018 will get 500 bonus Nectar points worth £2.50 each time they spend £20+ in Sainsbury's in the first two months from receiving their card Ė but don't use this as an excuse to spend more than you normally would.
  • You can also shop online at Sainsbury's to trigger the points bonuses, but buying anything (incl fuel) at Sainsbury's petrol stations doesn't count.
  • You need to give your Nectar card number when you apply for the credit card.
  • The bonus points will be added to your Nectar account within two months of the end of the offer period.
  • You get two points per £1 spent on Sainsbury's shopping and fuel, and one 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%.
  • 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
M&S Bank

£25 in M&S vchs + decent 0% period

M&S Bank* Ė 25 months 0% (18.9% rep APR after)

Accepted new M&S credit card* holders get a decent 25 months 0% on spending. Plus apply via our link by Wed 9 May and you can get a free £25 to spend in M&S on almost anything (incl clothes and food). It's split into two parts...

- £20 M&S voucher. Sent if you spend at least £100 on the card anywhere by 30 June 2018.
- Plus extra £5 in M&S pts. You'll also be sent a coupon with your card. Just swipe it or use online with your card to buy most things at M&S for any amount and you get 500 M&S points, worth £5.

Don't use getting the vouchers as an excuse to overspend, but it's a good deal if you just do your normal spending on the card.

Need-to-knows
  • The voucher will be emailed to you no later than 31 July 2018, and it'll be valid from 15 June to 31 August 2018.
  • You won't be eligible for the voucher if you already hold an M&S credit card or have done within the last year.
  • You'll earn one point for every £1 spent in M&S stores and one point for every £5 elsewhere. One point is equivalent to 1p, and points convert into M&S vouchers every three months.
  • 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 rate, up to 22.9%.
  • 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: 25 months 0%
  • Rep variable APR: 18.9% (see Official APR Examples)
  • Card issuer: Mastercard
  • Min income: N/A
  • Minimum repayment: Greater of 1% of balance plus interest, 2.5% or £5

Best BuysMoney transfer cards

If the dealer doesn't accept credit cards, or you need longer than 30 months at 0%, you can still pay using 0% Ďmoney transferí cards - it's just slightly more complex. These cards are best for loans of less than £5,000 or so, as you probably wonít 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. Itís 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 donít, youíll 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).

mbna

Lowest money transfer fee but you could get fewer 0% months

MBNA* up to 32 MONTHS 0%, 2.99% FEE (23.9% interest after)

This MBNA* card offers up to 32 months at 0% on money transfers with a lower fee than the cards below. You could be accepted for the card and offered fewer months which wouldn't make it as good a deal - but if our eligibility calculator shows you as pre-approved, you'll get the full 32 months at 0%.

Need-to-knows
  • You must do your money transfer within 60 days of opening the card to get the 0% period and lower fee. Transfers made after this will pay 23.9% interest and a 5% fee.
  • Poorer credit scorers might get fewer months at 0% instead of the full 32 Ė try the eligibility calculator to see if you're pre-approved for the headline deal.
  • You'll pay interest on any remaining money transfer balance at a rate of 23.9% after the 0% period is over.
  • Always pay at least the minimum monthly repayments or you'll lose the 0% deal.
  • Don't spend/withdraw cash on this card. It usually isn't at the cheap rate and cash withdrawals hit your credit file.
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 32 months 0%, 2.99% fee
  • Annual interest rate on money transfers after the 0%: 23.9%
  • Representative variable APR on spending: 19.9% (Official APR Example)
  • Card issuer: Visa
  • Min income: N/A
  • Min repayment: Greater of 1% of balance plus interest or £25
  • Any restrictions? Must transfer within 60 days to get 0%
virgin money

Longest money transfer card, but you could get fewer 0% months

Tesco Bank up to 36 MONTHS 0%, 3.94% FEE

This Tesco Bank card offers the longest 0% money transfer period of any card, though it has a higher fee than the MBNA card above. You could be accepted for the card and offered less time at 0% which wouldn't make it as good a deal.

Need-to-knows
  • Poorer credit scorers might get 32 or 26 months at 0% instead of the full 36.
  • You must do your money transfer within 90 days of opening the card account to get the 0% deal.
  • You'll pay interest on any remaining money transfer balance at a rate of 20.6% after the 0% is over, though some poorer credit scorers will pay up to 29.2% APR.
  • Always pay at least the minimum monthly repayments or you'll lose the 0% deal.
  • Don't spend/withdraw cash on this card. It usually isn't at the cheap rate and cash withdrawals hit your credit file.
ELIGIBILITY CHECK NOT AVAILABLE
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%, 3.94% fee
  • Annual interest rate on money transfers after the 0%: 20.6%
  • Representative variable APR on spending: 18.9% (Official APR Example)
  • Card issuer: Mastercard
  • Min income: £5,000
  • Min repayment: Greater of 1% of balance plus interest or £25
  • Any restrictions? Must transfer within 90 days
virgin money

High fee but you'll definitely get the full 0% period if accepted

Virgin Money* 32 MONTHS 0%, 4% FEE (20.9% interest after)

This Virgin Money* card offers either fewer interest-free months or a higher fee than the cards above, but if you're accepted you'll definitely get the full 0% period, so it could be a better option if you want that certainty.

Need-to-knows
  • You must do your money transfer within 60 days of opening the card to get the 0% period and lower fee. Transfers made after this will pay 20.9% interest and a 5% fee.
  • You'll pay interest on any remaining money transfer balance at a rate of 20.9% after the 0% period is over.
  • Always pay at least the minimum monthly repayments or you'll lose the 0% deal.
  • Don't spend/withdraw cash on this card. It usually isn't at the cheap rate and cash withdrawals hit your credit file.
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%, 4% fee
  • Annual interest rate on money transfers after the 0%: 20.9%
  • Representative variable APR on spending: 20.9% (Official APR Example)
  • Card issuer: Mastercard
  • Min income: £7,000
  • 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 canít get a large enough credit limit?

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

  • What if Iím rejected for a card?

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