Charge new car to credit card ???

[rjk514]

Its time in my life to purchase a new car, and I wonder if its possible to charge
the price of the car to my credit card to suck up some airline miles. CC max is 25K and car is about 23K. My thought is to charge it to the card, and then pay off card by monthly due date. Have the cash to pay for the car but could use the miles on the card. Don't know if this is possible or not and the pro/cons of this flier idea..looking for some of your valuable input....I know the argument between new vs. used, but this will be the last car I will ever buy (life is short) and I keep cars for at least 10 yrs..
What do ya think ...

 

[farmerEd]

I tried it once, and the dealer wouldn't accept it. I am pretty sure that MC/Visa takes about 3% of every purchase, so that is probably the bulk of the profit he would have made on the sale...wrote a check instead.

 

[crazy connie]

I tried to and it was turned down about 12 years ago. May have changed since then. I can not recall the excuse I was given. If you have success please let me know.

 

[peggy]

I've put the down payment for the last two cars we bought on a credit card and the dealer didn't blink. Those purchases were in 2001 and 2005, respectively.

I shouldn't think they'd have a problem with the full purchase price, but I could be wrong.

 

[MasterBlaster]

Since credit card purchases can be fully refunded in some cases you will most probably NOT be able to use a credit card to buy a car. However a dealer will usually take a down payment on a credit card of up to a few thosand dollars. Each dealer will have their own rules and limits for credit card down payments.

Keep in mind that the dealer pays between 2.5 and 4 percent of the credit card transaction. So if you are negotiating a deal then ultimately it is you that is paying that credit card transaction fee.

My advice is to keep the deal simple, negotiate the very best price. Then when in the finance office ask if you can use your credit card for the down payment. They will only say yse or no.

 

[OAG]

I actually did it several years ago, but, I think dealers have wised up to that ploy. My SIL recently tried it and it did not work with a dealer. I suppose one could line up a new 0% card and then transfer the loan to it -- but I am not sure that would work either. Maybe some of the 0% card people will chime in here.

 

[justin]

This would probably work: Pay cash for most of the purchase price. Then when they try to fleece you down at the financing table, say that you can't really pay cash for the last $4000 or so, so you'll have to charge it - would that be ok (you know, since you stretched a little on this to be able to afford a little nicer car )? That's $120 out of the dealer's pocket at the financing table that they'll probably eat to make the deal happen.

I'd settle on an agreeable price, then deal with financing later, particularly if you are paying primarily cash.

 

[Peaceful_Warrior]

First question:

Why pay the car in full when you can get a low interest rate and then invest the difference?

Sure, you carry debt. But it's actually more profitable to carry the debt in this case. Or is the amount saved just not worth the effort?

Its time in my life to purchase a new car, and I wonder if its possible to charge
the price of the car to my credit card to suck up some airline miles. CC max is 25K and car is about 23K. My thought is to charge it to the card, and then pay off card by monthly due date. Have the cash to pay for the car but could use the miles on the card. Don't know if this is possible or not and the pro/cons of this flier idea..looking for some of your valuable input....I know the argument between new vs. used, but this will be the last car I will ever buy (life is short) and I keep cars for at least 10 yrs..
What do ya think ...

 

[MasterBlaster]

First question:

Why pay the car in full when you can get a low interest rate and then invest the difference?

Sure, you carry debt. But it's actually more profitable to carry the debt in this case. Or is the amount saved just not worth the effort?

That may or may not be true.

To generate the amount of after tax after fees return that car loans get means that you'll take on some market risk.

If you are going to use a home equity credit line to finance your car then you are also putting your home at (additional) risk of default.

The lower risk approach is to pay in cash.

Also some people think that you really can't (or shouldn't) afford a car if you can't pay cash for it.

 

[Peaceful_Warrior]

Naturally there's risk vs. reward, not unlike the difference between investing in CDs and stocks.

Eloan offers no application fees for a 6% loan, so all he has to do is get preapproved if he thinks he'll get > 6% in other assets.

But they're also lost opportunity cost to be considered. If somebody puts down $25k on a depreciating asset, that's $25k that's lost forever. However, if one puts down the $25k into an appreciating asset and then uses that asset (or other assets) to pay for the loan, then even after the loan is paid off the asset continues to generate interest/income.

I'm sure a spreadsheet would show the numbers on this, but as long as the person intends to live for quite some time, then investing the assets and leveraging cheap debt will yield more total assets down the line (even if it isn't more assets at the time of the loan completing).

I guess I'm just a huge fan of leveraging cheap debt while allowing assets to grow. When I look at the numbers, I rarely see any compelling reason not to leverage the debt other than emotiona reasons such as "peace of mind."

That may or may not be true.

To generate the amount of after tax after fees return that car loans get means that you'll take on some market risk.

If you are going to use a home equity credit line to finance your car then you are also putting your home at (additional) risk of default.

The lower risk approach is to pay in cash.

Also some people think that you really can't (or shouldn't) afford a car if you can't pay cash for it.

 

[MasterBlaster]

Naturally there's risk vs. reward, not unlike the difference between investing in CDs and stocks.

Eloan offers no application fees for a 6% loan, so all he has to do is get preapproved if he thinks he'll get > 6% in other assets.

But they're also lost opportunity cost to be considered. If somebody puts down $25k on a depreciating asset, that's $25k that's lost forever. However, if one puts down the $25k into an appreciating asset and then uses that asset (or other assets) to pay for the loan, then even after the loan is paid off the asset continues to generate interest/income.

I'm sure a spreadsheet would show the numbers on this, but as long as the person intends to live for quite some time, then investing the assets and leveraging cheap debt will yield more total assets down the line (even if it isn't more assets at the time of the loan completing).

I guess I'm just a huge fan of leveraging cheap debt while allowing assets to grow. When I look at the numbers, I rarely see any compelling reason not to leverage the debt other than emotiona reasons such as "peace of mind."

I suspect that we will never agree on this topic as we see the world differently...

Having said that, your analysis is a little too simple. Your return must be > 6 % after all taxes and fees are paid. So if you are in a combined federal/state bracket ~33% then you'll need to get after fee returns of greater than 9 percent.

In my state you could get the tax bite down to maybe ~25% by getting returns of only long term capital gains. That would imply a return of better than 8 percent before taxes. That's certainly is possible and is about in line with what I hear market returns will be over the next decade or two. However if you beleive that you are going to see great gobs of money coming your way via financing your car I beleive that you are mistaken. Any market returns that you get via the financed cash will be overwhelmed by the depreciation of the car along with the interest that is due.

Somehow I never look at buying a car as a money making opportunity.

 

[SteveR]

We were able to only charge $1000 on the CC by the dealer. I told them our credit limit was far higher than the price of the car but they said it was "policy" to not charge more than $1k. I think it has to do with the CC fee they get charged and the risk of default.

It would have been great to have gotten a ton of FF miles on the car but it was not to be.

 

[mickeyd]

I bought a car about 7-8 years ago with my Discover card, ran up a bunch of bonus $ and then paid it off at the end of the month. I was prepared to pay cash for the car using a check from my MMF, but could not resist the opportunity to cut myself an extra piece of cake. I have since purchased 2 cars and was told that it was now impossible to charge it.

Maybe I got them in a weak moment when they would give me a break just to get the sale.

 

[Sue J]

I've never bought a car with a charge card but I did pay a semester of college tuition with my Discover card, just for the rebate. Discover's rebate is usually so low, 1/4%, 1/2% or 1% once you get over $3000 since your anniversary date, but they have quarterly rebates of 5% on specific purchase. Last summer they had one on college expenses up to a limit of $100 rebate ($2000 in purchases) so I charged the fall tuition just for the extra $100.

We had the money to pay it off when the bill came but they also had a 6 month 0% on purchases, so we just made the minimum payment until the 0% ended.

 

[ERD50]

but I did pay a semester of college tuition with my Discover card, just for the rebate.

almost all of the college expenses have been going on the card to get the rebate. It's a 1% flat rate on one card, a sliding scale up to 1.5% on the other (some only accept the 1% card ). Further, some of the fraternity house charges are spread out over three months, and are reduced if you pay it all in advance. It's only about a $30 credit, but it is about 6% of the amount that you are pre-paying, so why not take 6% for giving up your money for 1 to 2 months? It's less work for me too. Every little bit helps.

The school charges a fee to bill monthly on the card vs lump sum. I was surprised how many parents jumped at the chance to pay extra to have it billed monthly. DW said 'well, maybe they just don't have the money' - OK, but if they don't have it this month, how are they going to get it over the next six months? That's a heck of a saving rate (private school tuition).

Just goes to show the power of saving and having some liquidity to work with. There seem to be all sorts of 'deals' out there for people who can pay now vs later.

-ERD50

 

[spideyrdpd]

Hi
You could invest in stocks and hold for over a yr and only pay the 15% in taxes. Or invest in one of Brewers shipping companies.
Also I am not sure why you guys are talking 6% . Dont they still have some low interest delas on new cars. Although I hear you can get a better price doing a rebate and financing it.
Rob

 

[donheff]

almost all of the college expenses have been going on the card to get the rebate. It's a 1% flat rate on one card, a sliding scale up to 1.5% on the other (some only accept the 1% card ).

Back in the early 90s I paid a couple of years of DSs tuition on an airline miles CC with zero charge to me. I paid off the charges at the end of the month as always and collected the miles. That paid for a couple of nice trips. By the time DD started school in 2004 all of the schools had set-up this 1% fee based approach - too bad.

 

[yelnad]

The college I work at charges a 2% Convenience Fee for each payment made by credit card. It really adds up since tuition is so darn high.

 

[Craig]

Dealers don't make enough money on most new cars to be able to afford to take that hit for credit card fees. They'd be giving away significant gross. I don't know any dealers that would allow this ... now, the down payment ... that's a different story usually.

 

[maddythebeagle]

I have read similar to what SteveR posted....can usually only do a small amount....but hey, why are you asking here....ask the dealer...

 

[Sue J]

The college I work at charges a 2% Convenience Fee for each payment made by credit card. It really adds up since tuition is so darn high.

Yes, that's right. When my older son was in his last year his college stopped taking VISA cards and started charging a 2.5% fee if you used a Mastercard or Discover card. You could make electronic payments from a checking or savings account for free.

The younger son goes to a different college and so far they haven't started charging a fee. Both colleges are state universities in Ohio. I wonder how long this college will go without charging a fee.

 

[kaudrey]

2 years ago I tried it and they would only let me charge $2500.

Karen

 

[Coach]

It's worth asking. I bought a car in 2001 and paid $4000 with credit card -- the most they would allow -- and the rest by check. And a money market check, no less, number 107 or so, drawn on a bank thousands of miles away.

Coach

 

[FinanceDude]

Most of the comments here are right on. The dealer pays 2.5-3% to VISA or another CC company, so they don't aren't going to let you charge $20000 on it.

Plus, CC companies are getting more "miserly" on their rewards anyway..........

I thought everyone paid cash for their cars on here...........am I wrong??

 

[Calgary_Girl]

I tried it once, and the dealer wouldn't accept it. I am pretty sure that MC/Visa takes about 3% of every purchase, so that is probably the bulk of the profit he would have made on the sale...wrote a check instead.

Same thing here. The dealership told us the credit card companies were wising up to this and our purchase would be limited to 5% of the cost of the car.