Generally speaking, using a credit card for a substantial car down payment instead of securing a traditional car loan for that portion isn’t the most financially advisable move, unless you have a very specific strategy.
Is It Financially Advisable to Use a Credit Card for a Car Down Payment Compared to a Traditional Car Loan
Car loans typically come with much lower interest rates than credit cards. We’re talking single-digit percentages for car loans versus high double-digit percentages for credit cards.
Also read: Do Car Dealers Take Credit Cards for Down Payment? 5 Shocking Facts That Could Save (or Cost) You $1000s
If you put a down payment on a credit card and can’t pay it off in full almost immediately, you’ll start accruing interest at that high credit card rate.
This means that portion of your car’s price will become significantly more expensive over time than if you had simply financed it within your car loan at a lower APR.
The only real exception where it might make sense is if you’re using a 0% APR promotional credit card and are absolutely 100% certain you can pay off the entire down payment amount before the promotional period ends.
Even then, you need to factor in potential credit utilization impacts on your score during the loan application process. For most people, a car loan is the more sensible and cost-effective financing solution for large vehicle purchases.
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