When researching car finance options, it might feel like there’s too much to consider. PCP, HP and leasing are all popular ways to get your brand new car on a budget, but can often come with restrictions or specific terms to adhere to.
So, what can you do if none seem like a good fit?
It might not be what first springs to mind, but an alternative to other car finance options or paying for a car with cash is to pay using a credit card.
Why use a credit card to buy a car
Although it’s less common than other methods to finance your car, using a credit card doesn’t have to be complicated. Like other finance options, you get to spread out your payments, plus a number of other benefits.
Paying as little as £100 (up to £30,000) towards your car with a credit card gives you additional protection under the Consumer Credit Act. This means that if you fall victim to a car buying scam, or your dealership goes out of business, you won’t end up paying for something you never received. You will typically be covered for the full cost of the car, but you shouldn’t rely on this if you’re not sure a deal is legitimate.
Numerous credit cards offer incentives and rewards for spending money using their card. Often you’ll get points for every pound you spend or spending milestone you meet, so the cost of a car could result in a lot of points to spend. Some even offer cashback incentives, which you could use towards your car running costs, or put in a bank for any expected car maintenance.
Potential interest-free credit
The credit score needed to buy a car is particularly important when it comes to using a credit card, as it could have a huge impact on your costs. If you’ve got a decent credit rating and manage to get a 0% APR offer, you can try to pay off your car during this period and pay no interest at all.
Buy from anywhere
When using a credit card to pay for your car, you have freedom to buy any car from anywhere. PCP and HP may only be available on certain models, whereas with a credit card you can buy a used car with ease. You can even buy your car online, or from a private seller provided they have the means to accept credit card payments.
However you should bear in mind that there are some potential downsides to consider when paying by credit card:
- Some dealerships won’t accept credit card payments.
- You might not always be able to cover the full purchase price with your card.
- There could be additional fees for paying by credit card.
- Interest rates may shoot up after the low introductory period.
- You’ll need a good credit rating to qualify for the lowest rates.
How to use a credit card to buy a car
Provided you’ve been approved for a credit card and have it ready to pay, paying by credit card is pretty straightforward.
Since it works much the same as buying upfront (except you’re confined to your credit limit), there’s a couple of things to consider first.
You want to think about how much you should be spending on a car, and look at the best times to buy a car. As the finance is not offered through the car dealer and you’re paying in full, you may be able to negotiate the upfront cost if you head to the showroom towards the end of a sales quarter.
Once you’ve decided on your car, payment can be carried out in just a few steps:
- You use your credit card to cover the full cost of the car upfront.
- You repay the amount back to the credit card company through X monthly repayments.
- If you cover the cost during the period of a 0% interest offer then you’ll only pay the cost of your car. If you continue paying outside this timeframe then you’ll have interest on top.
Dealerships may have a limit on how much you pay by credit card, so you could have to contribute towards the payment with cash or debit card. This can also be done if your credit card limit won’t cover the total amount of the car.
Is it right for me?
If you want the advantage of immediately owning your car, but don’t have the funds upfront, paying by credit card can be a great option.
Paying by credit card means the car is yours straight away and you can do what you like, which is nice particularly if you do a high number of miles, or want to modify your car in some way. You won't have any of the restrictions applied to PCP and leasing contracts, so the only cost to cover is the car.
However, you need to be realistic with your budget and the amount you can pay over a certain period. If you aren’t going to be able to pay off the price of the car within the 0% interest timeframe, it could work out a lot more expensive than you initially imagined, and more than you can afford.
Alternatives to consider
If using a credit card won’t work for you, you might want to consider using a personal loan. You’ll still have the advantage of owning your car right away, plus payments are spread out over terms of up to 7 years. See our post on “how to get a car loan.”
With so many different finance types available, it can feel overwhelming trying to work them all out. If you haven’t already, check out our guides:
If you’ve done your research and just some need some guidance on choosing between them, we’ve gone head to head with the different types of car finance to help you out:
- Lease or buy
- Lease vs finance a car
- PCP vs lease
- PCP vs HP
- PCP or bank loan
- PCP or buying outright
- PCP vs HP vs loan
- PCP vs HP vs lease
- Hire purchase vs lease
- Lease purchase vs hire purchase
- Lease purchase vs PCP
- Lease vs lease purchase
Our comparison posts can help you decide what finance is right for you, looking at the main pros and cons of each.