Should I buy a car with my credit card? Whiteboard Wednesday
Should I buy a car with my credit card?
Hi, Welcome to Whiteboard Wednesday.
I’m Paul, I’m the founder of Fair Go Finance
At Fair Go Finance we come across a lot of stuff relating to consumer finance and personal loans. Saw something this week we thought was of particular interest. We saw that a guy bought a $45,000 new Honda on a credit card.
Why would you do that, what are the risks involved in doing this, and are there some better options around for you are some of the things we wanted to touch on today.
So why would you buy a car on your credit card?
In this case it turned out the guy did it for the equivalent of $675 in reward points. Now it’s not a lot of incentive and when there are a lot of risks involved in doing this. Some of those risks in this case were that he needed to refinance that $45,000 off that credit card within a month otherwise 17% interest rate on the card kicked in.
To do that he refinanced that one credit card onto three credit cards that gave him an extra 14 months of 0% interest, but still he’s under pressure to repay that before the high interest rate kicks in
Alternatives to using a credit card to buy a car
The alternatives that people should be looking at, and there’s a range of these that we would recommend as opposed to buying a car on a credit card, include things like buying secondhand car. Do you need a brand new car, or do you want to get a 20% discount on a secondhand car a year old?
Now you’re gonna save yourself $5000-10,000 doing that, which is a lot more than the $675 in travel dollars.
Other options include haggling with the dealer and saving yourself more than $675, probably going to be able to do that if you shop the car around between dealers.
Also at the dealer you can get a 0% interest loan upfront, giving yourself the security that you’ve got the time to repay that loan over a number of years.
The other option is you get preapproved at a car finance company, like us, that enables you to go to a yard, haggle on the price and you’ve got the finance secured upfront.
There’s a range of options that are better than buying a car on a credit card, which we think you probably need to consider if you’re in the market for a new car or a secondhand car.
So what do we score this idea?
Well 1/10 for energy, 1/10 for ingenuity, so all in all we give it a 2/10.
For more ideas and for more information on consumer finance follow us on Twitter @FairGoFinance.
Hopefully you found this informative, see you next time.