Using Credit Card to Buy a Car

djesr on 11/04/2023 - 11:39

Is buying a car with a credit card a good idea? and can it be done?

Idea is that I use a zero interest credit card to pay for the car, I understand the risk and the negative perception on buying a depreciating asset using credit line
but with my current situation getting a car (for about $20k with using about $5k of cash and the rest in CC) is the best option.

Plan is to get a CC with low fees and longer zero intrest period pay the credit amount in monthly installments and when I get to the end of the zero intrest period get another CC with similar zero interest BT.

I believe my options kind or limit as I will have to buy from a dealership as privet sellers wont have CC facilities plus i will have to pay 1-2% fee on the transaction (~$400).
I will have to get a CC with high limit.

anything Im not picking up?

TIA

Financial Credit Card

Comments

  • kerfuffle on 11/04/2023 - 11:40
    +5

    The fact that the dealer most likely won't accept your $15K payment on credit card.

  • Halo375 on 11/04/2023 - 11:45
    +1

    Won’t most credit cards just give you 30 days to pay the $15,000 and then whack you with 17% interest when you fail to do that?

    • jv on 11/04/2023 - 11:48
      +1

      give you 30 days

      55

      • Surfsalot on 11/04/2023 - 12:18

        some are 45

    • coffeeinmyveins on 11/04/2023 - 11:57
      +1

      OP wants to swap between cards taking advantage of 0% transfer but isn't factoring in the risk of rejection.

  • jv on 11/04/2023 - 11:47
    +8

    getting a car for about $20k
    anything Im not picking up?

    Women…

  • coffeeinmyveins on 11/04/2023 - 11:57
    +2

    So your idea is to float between CC's using 0% transfer balance, correct?

    The problem with doing this is you'll need to ensure that you are moving from CC to CC every 30 days or whatever the 0% interest period is. What if you get rejected by one, or two? Then you're stuck with almost 25% interest payments on a large amount of money.

    Also with an amount of 20% you'll need to get a min spend of that much which isn't small for a credit card. You may get rejected outright just because of this and having such a large balance. I guarantee you that by the 3rd card you will start getting rejected and get absolutely wrecked.

    This is not a good strategy. People don't generally do this and it's high risk.

    • djesr on 11/04/2023 - 12:10

      I was more thinking of "0% p.a. interest on balance transfers for 32 months" CC available
      similar to https://www.stgeorge.com.au/personal/credit-cards/low-rate?g…

      so churn through CC every 18-24months

      • coffeeinmyveins on 11/04/2023 - 13:52

        Ok so as another poster has said, you'll need to have two $25k cards at the same time during the crossover period. Does your salary allow for 50k of debt to be serviced?

  • intelseb on 11/04/2023 - 12:09

    secured car loan will be the lowest interest, unless you can re-finance a house you own that has equity.

    • happydude on 11/04/2023 - 12:24

      secured car loan will be the lowest interest, unless you can re-finance a house you own that has equity.

      $30,000 @ 10% interest over 5 years is $8,151 in interest.
      $30,000 @ 5% interest over 30 years is $27,937 in interest.

      The lower interest rate on the home isn't always the best price because of the longer term.

      • brendanm on 11/04/2023 - 12:36
        +1

        You don't pay the minimum, you pay what you would if you had a normal car loan.

  • happydude on 11/04/2023 - 12:17
    +1

    Huge hole is that if you have a $25k limit, then to balance transfer to a 0% deal you will need another $25k card.

    This means that you will need a $50k credit limit across the cards and the income to service $50k of debt, whether you are using it or not.

    Roughly, you will need to have disposable income of $600 per week to repay the 50K @ 20% interest in 3 years. Which from memory the lending test that if you fill all your credit that you could repay the lot in 3 years.

    If you have $600 spare a week you are better off with a car loan paying it off in under a year. 1 application stuff up or rejection and you'll be paying a shit tone more.

  • chuneeperformance on 11/04/2023 - 12:17

    You can buy a car up 60k that I know of on Amex.

  • brendanm on 11/04/2023 - 12:20
    -1

    Do you already have this credit card? Can't really see them giving someone with only $5k spare cash a $20k card, then another one at the end of the interest free period.

  • rockman117 on 11/04/2023 - 12:22

    I was literally thinking about the same thing. There are cards giving No Fee Balance Transfer & 0% p.a. Interest for 32 Months.

    1) Buy a $15k from dealership with another CC
    2) Balance transfer the old CC to 0% p.a. interest free for 32 months CC.
    3) Put the $15k cash I would have used to buy the card into High Interest Savings Account (e.g. BOQ's 5.15%, earning $772.5/yr)
    4) After 32 months, pay off the $15k CC balance. Should be left with the interest of $2060 ($15k * 5.15%/12mths * 32mths)

    Note this exclude the annual fee for the no fee BT CC.

    • freefall101 on 11/04/2023 - 12:53

      Yup, works fine. I have $10k sitting in my offset account against my home loan and a $10k 0% credit card balance. Only thing to remember is you do need to pay minimum monthly installments (usually 2% of the balance, so you'd start off at $300 a month)

      The hardest part is the credit limit, basically need double whatever you're doing in credit available. I went with $10k to limit the risk of it being declined (I only just took on the home loan, so I went from no debt to a lot recently) and because I only really had $10k worth of stuff to put on the credit card anyway.

      Of course, this is sensible because you have the cash. Doing it without the cash, like OP, is opening it up to a big risk in 32 months if it's not paid off.

    • djesr on 11/04/2023 - 13:11

      Exactly I was thinking.

  • Fergy1987 on 11/04/2023 - 12:46
    -2

    probably the worst idea ive ever seen.

    • djesr on 11/04/2023 - 13:10
      +1

      Thanks for your very productive comment

  • bleugh on 11/04/2023 - 12:47

    we just moved back from the UK to Australia,
    put a $20k second hand car on a 0% 0 fee UK Lloyds bank credit card with no problem :-P

    • djesr on 11/04/2023 - 13:12

      Bought it off a dealership?

  • Ziff on 11/04/2023 - 12:55

    If you have a credit card you're going to close soon and you opened it some time ago, you could get the new credit card first (check that they allow the balance transfer to be done within X days of approval, rather than on application), rather than applying for two in such a short time frame to do the balance transfer.

    You could also do this with only one new credit card. For example, NAB has a 0% p.a. on purchases for 20 months offer at the moment + $59 p.a. fee: https://www.nab.com.au/personal/credit-cards/nab-low-rate-ca…

    I'd aim to pay it back in 19 months though just to be safe - which would be about $1,058 per month to borrow $20k, incl the annual fee (or the minimum, if it's higher of course). Once you buy the car, cut up the credit card and don't use it again - just pay it down.

    It also means if you were to balance transfer it off in 19 months that you wouldn't look like you're churning in a short period of time.

  • eek on 11/04/2023 - 14:48

    Paid around $59K on a personal Amex platinum charge card at a car dealership. Fee was 1.5% which I was willing to accept.

    • Bargainitis on 12/04/2023 - 09:57
      +1

      I dont quite get this…. economically.

      You would have gotten 60x2.25 = 135,000 amex points which roughly converts to ~$600-650 of value but cc surcharge fees were $900.

      You only got 45-55 days of interest free period if you timed it perfectly.

      Why? what am I missing.

      • eek on 12/04/2023 - 10:31
        +1

        No idea. Thought it was worth it at the time. Rather than transferring the cash, pay on card because points! :/

        • Bargainitis on 12/04/2023 - 11:08
          +1

          look, it wasn't the worse decision so its okay. Delta was $300 negative but you more time to pay it off.

          In any event, always run the math on it first. One thing I did do when I purchased a relatively expensive car was to ask how much I could put on my amex without surcharge and maxed that. The rest I did with a check. Next time!

          thanks for the reply.

  • nige0090 on 12/04/2023 - 17:16

    I've bought a car with a credit card.
    The dealer was unbothered.
    Only downside would be the CC fee.

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