Recently, a survey conducted by FICO showed that Millennials are very much interested in owning a car. However, some of them don't want to finance a car through a bank or dealership.
The survey polled 1,000 U.S. consumers over the age of 17 and was conducted between last October and November. It found that 19% of Millennials polled need a vehicle so badly that they would buy it on their credit card. This choice is surprising, considering that interest rates on credit cards are typically much higher than those assigned when getting auto financing through a bank, credit union or car dealership.
Other findings in the survey showed that 34% would prefer a full cash purchase and 27% said they would get financing through banks and credit unions. 20% of Millennials surveyed said they would finance their purchase through a dealer.
But, going back to that first part - can you really buy a car with a credit card?
Credit Cards and Car Purchases
For some car buyers, using a credit card to buy a car could be convenient and provide perks in the form of reward points that they can use towards other purchases. However, dealers hate it since they, like other businesses, have to pay card processing fees. Those fees can eat up a significant amount of a dealer's profit on the sale.
Because of this, the general rule is that dealers won't let you pay the entire amount of a car purchase on plastic. But they may allow a buyer to put a portion of the amount on a credit card. While this may sound great, there is one more catch: in order for a dealer to even give you any of these options, you will need to have excellent credit.
So, if you have damaged credit and were considering using a credit card to cover a down payment (or any amount), you will probably be out of luck. Here's why:
- Subprime lenders want the down payment to come from your own funds.
- In most cases, it's more expensive to use a credit card than to get subprime auto financing.
- Using a credit card would skew your debt-to-income ratio (DTI), could affect how much you could finance, possibly jeopardize your loan approval, and could even reduce your credit rating.
It is recommended that you have a cash down payment or trade-in equity ready for the dealer when you are ready to buy. Or, at the very least, the money to cover tax, title and license fees (TTL).
Need a Car? We Can Help
Drivers Lane has a nationwide network of subprime auto dealers that have lending resources capable of approving car buyers with bad credit. After you have completed the fast, simple, secure and obligation-free online application, we will quickly connect you to the nearest dealer in your area that can give you the best chance of being approved for the auto loan you need. Start today!