Can I Put a Car on a Credit Card?

While earning rewards or simplifying payment might seem appealing, paying for a car with a credit card is generally not straightforward or universally accepted. This approach has specific considerations and limitations for both sellers and buyers.

Dealership Acceptance and Limitations

Many dealerships have policies that limit or prohibit the use of credit cards for the full purchase price of a vehicle. This is primarily due to the merchant processing fees, also known as interchange fees, that businesses incur for each credit card transaction. These fees typically range from 1.5% to 3.5% of the total transaction amount, with some card networks like American Express often charging higher rates. For a large purchase like a car, these percentages can translate into substantial costs for the dealership.

To mitigate these expenses, dealerships frequently cap the amount that can be charged to a credit card, or only accept them for down payments, such as an initial deposit or up to a few thousand dollars. These limitations are usually communicated clearly to the buyer early in the sales process to manage expectations regarding payment options.

Understanding the Financial Impact

Using a credit card for a car purchase carries significant financial implications for the consumer, particularly concerning interest rates and credit utilization. Credit card annual percentage rates (APRs) are considerably higher than those for typical car loans. As of early to mid-2025, average credit card APRs for accounts incurring interest have ranged from about 21.95% to over 25%. Even with good credit, APRs can still be around 20%, while those with lower credit scores might face rates approaching 28% or more.

Carrying a large balance from a car purchase on a credit card means that interest charges can accumulate rapidly, making the vehicle significantly more expensive over time if the balance is not paid off immediately. Furthermore, a substantial credit card balance can negatively impact one’s credit score. Credit utilization, the amount of credit used compared to total available credit, is a major factor in credit scoring models. Financial experts recommend keeping credit utilization below 30% of available credit. A large car purchase could cause a consumer’s credit utilization to spike, potentially leading to a notable decrease in their credit score. While some credit cards offer rewards or cash back, the value of these benefits is almost always outweighed by the high interest charges if the balance is not paid in full by the due date.

Strategic Use and Other Financing Options

In specific situations, using a credit card for a car purchase might be considered, though it is not recommended for the full amount. One strategic use could be for a small down payment, especially if the consumer intends to pay off that specific amount immediately to earn rewards without incurring interest. This only works if the balance is fully cleared before the billing cycle ends.

For most car purchases, more financially sound options are available that offer lower interest rates and structured repayment plans. Secured auto loans from banks, credit unions, and dealerships are the most common financing method. In the first quarter of 2025, average interest rates for new car loans were around 6.73%, while used car loans averaged about 11.87%. These rates can vary based on creditworthiness, with superprime borrowers securing rates as low as 5.18% for new cars.

Another financing alternative is a personal loan, which is typically unsecured and may have higher interest rates than secured auto loans, but generally lower rates than credit cards. Unlike credit cards, auto loans often come with fixed monthly payments and a defined repayment period, providing a clear path to ownership. New cars assembled in the U.S. and used for personal purposes may qualify for a tax deduction of up to $10,000 in auto loan interest annually for tax years 2025-2028, subject to income limitations.