Why can't I buy a car with a credit card?

[dollies]

I had this great idea that I would buy a new car that we need with my credit card that gives cash back. We have the money for the car to pay it in full with cash, but what I wanted to do was to put the car on my credit card, and then when the credit card bill came I would pay it off in full so there would be no interest charges. This way I would get a huge extra bonus from the credit card for the price of the car. But when I went to do this, the dealership said that they would not accept a credit card as payment. Are they allowed to do this? Why would they accept my credit card payment when buying the car? Is there anything that I can do so that I can use my credit card and get the bonus that I was hoping to get? It seems to me that it's ridiculous that they won't accept a credit card payment when they're more than willing to accept it when they make repairs on the car at the dealership. Are they only allowed to accept credit cards sometimes but all the time? This is very frustrating because I had planned to get this extra bonus, but now it looks like I won't be able to.

[KTP]

I sort of tried this too but only after I had negotiated the final price. The problem is the dealer has to pay Visa or MasterCard the 3% or whatever merchant fee. They obviously don't want to do that.

I did manage to weasel my way into putting $4,000 of the car price on the credit card by saying I only had the remaining money in cash in the bank. Small victory. :-)

[dczech09]

Any merchant can decide what methods of payment they are willing to accept. The only method of payment that businesses legally must accept is cash (although some try to insist that they will not accept cash).

As for cards, they can choose if they will accept credit cards or debit/check cards only. For example, Dave Ramsey only accepts debit cards. There is a grocery store chain here in Wisconsin that only accepts debit cards as well. Businesses can decide not to accept credit cards if they so choose.

The different between credit and debit transactions is that credit runs through the Visa or MasterCard system while debit runs through the electronic funds transfers (EFT) system. Credit transactions that run through Visa and MasterCard require the merchant to pay a fee (percentage of the transaction). So if the merchant does not want to pay this fee, all they have to do is not run any transactions as credit.

Hope this makes sense!

[JustBill]

A big piece of the issue is their not wanting to invite disputes by customers with the cc issuers and creating future headaches. Most all dealers will tolerate a several thousand dollar payment on a cc, additionally there have been other consumers who have successfully applied the entire amount on a cc, albeit rare.

Oddly enough, a dealer will take a cc for a 10k repair, yet attempt to limit a down payment to 2k on a card.

[kork13]

Back about 10-15 years ago, my father managed to do exactly that -- buy a new car entirely with his credit cards, then pay them off at the end of the month. The dealership made him pay for the $10k car between 2 credit cards, but they let him do it. The most I've managed (or heard of more recently) was to convince them to allow you to put a few thousand dollars of the downpayment on a credit card. Anything more than about $2k-$3k, they often require you to pay the additional cost of the merchant fee (3% or whatever it is). Often times, car dealerships only actually make a couple thousand dollars' profit on some cars (the actual carmaker gets most of the profit), so paying $500 or more in credit card merchant fees eats into the dealership's profit significantly.

[disneysteve]

Oddly enough, a dealer will take a cc for a 10k repair, yet attempt to limit a down payment to 2k on a card.

car dealerships only actually make a couple thousand dollars' profit on some cars (the actual carmaker gets most of the profit), so paying $500 or more in credit card merchant fees eats into the dealership's profit significantly.

JustBill, kork13 said exactly what I was going to say. The reason they'll take the 10K charge for a repair is that their profit margin is high there. On the car sale, they don't make nearly as much. If they lose 3% to the CC company, it cuts into the profit.

[bjl584]

My cousin has a GM Credit Card. He earns money towards a down payment of a new GM vehicle by using the card. I wonder if a GM dealership would be willing to accept this card for a new car? They might get the 3% fee waived or get some form of kick back from GM finance if they take this card. Not sure, but it's a thought.

[disneysteve]

My cousin has a GM Credit Card. He earns money towards a down payment of a new GM vehicle by using the card. I wonder if a GM dealership would be willing to accept this card for a new car? They might get the 3% fee waived or get some form of kick back from GM finance if they take this card. Not sure, but it's a thought.

I don't think it works that way. The card isn't issued by the dealers or the manufacturer but by Capital One so I'm sure it is treated just like any other credit card.

[ua_guy]

Good reasons already stated. The dealer really doesn't care how you pay, as long as it doesn't cost them extra money. That's why you'll find huge variations in what dealers will accept. A big name dealership might let you pay with a credit card, depending on the car deal. It doesn't hurt to ask. If they say yes, chances are you haven't worked them hard enough on the purchase price.

There's a way around it, though. Card issuers often send convenience checks. You could presumably write a check from your credit account to cover the balance on the car. The terms vary so widely on those checks though--you really have to be careful and understand everything about them. Sometimes there's a fee, or a promotional rate with a defined time period, they don't always offer the same rewards that using the card does, and the purchase protections generally aren't the same as using the card. If a really, really good deal on one of those checks come up (0% APR, no fee, etc), they can be a great way to pay down a traditional vehicle loan that carries interest if you're smart and can master the game. If you've already got a good rate, you're not saving much money. It's more about the obsession of saving money at that point.

Let's look at the overall picture, though. 1% Cash Back on a $30,000 vehicle purchase is $300. Or maybe as many as 30,000 "points" which probably have only slightly more monetary value if spent on an airplane ticket or hotel accomodations. It's usually more beneficial to negotiate more off of the vehicle price, or as for free services like oil changes and maintenance that are truly worth more to the consumer than the dealer has to pay for them. Or, in states that allow dealers to charge a $150 "documentation fee", hit them hard on that too. A title application and registration paperwork should be less than $35 and a couple of postage stamps.

[annibe11e]

I used to be a finance manager at a dealership. We accepted credit cards as payment, but we tacked on the 3% fee. It's true that the profit margin on new vehicles is usually quite low. If your cash back exceeds 3%, you could offer to pick up the fee.

[Gailete]

When we got our new used car last year, they wouldn't accept credit cards or even a check written for over a certain amount. Checks have the potential of bouncing and causing fees as well as the cc fee. Even with our high credit score we were only allowed to write a check for the down payment and finance the rest. I thought it was funny at the time, so interesting to hear the reasons perhaps behind what they would or wouldn't do.

[ua_guy]

When we got our new used car last year, they wouldn't accept credit cards or even a check written for over a certain amount. Checks have the potential of bouncing and causing fees as well as the cc fee. Even with our high credit score we were only allowed to write a check for the down payment and finance the rest. I thought it was funny at the time, so interesting to hear the reasons perhaps behind what they would or wouldn't do.

Seems strange. Did you finance a greater portion of the cost because you were limited to a certain amount on a personal check? Cash, wire, or debit could have fixed that, if that's the case.

[Gailete]

Did you finance a greater portion of the cost because you were limited to a certain amount on a personal check?

Yes, they would only take so much.

[QuarterMillionMan]

In 2003 when I moved here to Los Angeles, by the way I flew over from Hawaii, I was without a car. At a used car car dealership I bought a used 1997 Ford Ranger for $5000 with my credit card. I paid off the balance the the following month and I accumulated the reward points on the credit card. True story.

[elessar78]

Say the negotiated purchase price is $10,000. The merchant fee would be $300. If you stand to gain more than $300 from putting it on the cc, why not ask if you can put $10,000 on the cc and you'll pay them $300 cash to cover the merchant fee?