How to buy a car with a credit card in Australia

Wondering if you should buy a car with your credit card? Here’s how to weigh up the pros and cons.

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It's often possible to buy a car with a credit card in Australia, but your options will depend on factors including the cost of the car, your credit limit and the car seller. You can use this guide to learn more about using a credit card to buy a car in Australia, including potential costs and other ways to pay so you can decide what's right for you.

Why would you buy a car with your credit card?

How you decide to pay for a car is really up to you and the payment method (or methods) that you want to use. But some of the reasons people could choose to buy a car with a credit card include:

  • Reward points. If you have a rewards or frequent flyer credit card that earns points per $1 on your eligible spending, buying a big ticket item like a car could help you get rewards faster.
  • Interest-free periods. A credit card with an introductory 0% purchase rate could give you a way to get your car and pay it off without interest for a set amount of time. If you manage repayments well, it could even allow you to avoid paying any interest on your credit card.
  • Split costs. If you have some cash stashed away for the new wheels, but are just a little bit short, your credit card could help cover the difference without you needing to apply for other finance.
  • Immediacy. If your current car is broken down or you've seen a great deal that's only available for a limited time, a credit card could allow you to get the car you want straight away.
  • Difficulty getting a car loan. Your current financial circumstances might not be ideal for applying for a new loan. For example, it can be harder to get approval if you’re between jobs or have a lot of existing debt. You may be able to avoid the hassles of applying for a new loan if you have a credit card with a high enough credit limit.

man's hand, credit card, laptop, and toy car

What to think about before buying a car with your credit card

While there can be benefits to paying for a car with your credit card, here’s what you need to weigh up before pulling out the plastic:

  • How much will the car cost?
    It’s usually only viable to use a card for lower-cost, used cars. Most car loan options start at around $5,000, so if the car you want is less than this then your finance options may be narrowed down to a credit card, personal loan or savings.
  • What’s my credit limit?
    Naturally, you will only be able to charge any purchase on your credit card up to its credit limit. You could also consider asking for a credit limit raise if your credit score is healthy, or charging the car to several credit cards.
  • How much can I afford to regularly put towards the debt?
    Draw out a repayment plan before you commit to making a large purchase like this. Carrying a large balance on your credit card should generally be avoided. If you’re taking advantage of a 0% or a very low purchase interest rate, calculate how you can pay it off before you promotional period ends and consider what standard interest rate will apply if you have a balance remaining. Some 0% purchase options last between 3 to 15 months, so if it's going to take over a year to pay off, a car loan will probably be a less expensive option.
  • Will there be a surcharge?
    Some sellers could apply a surcharge to your credit card payment, typically between 1.5% and 3% of your transaction value (or more depending on your card type). To put this into perspective, a 3% surcharge would cost $300 on a $10,000 purchase. Note that car loans also involve a flat application fee between $120 and $378, albeit for larger loan amounts.
  • Should I let my credit card provider know?
    Sometimes large transactions on your credit card account could be flagged by fraud monitoring services. If you’re concerned about this, you can contact your credit card provider ahead of time to let them know it is a planned purchase.
  • How will this affect my cash flow?
    If you plan to use most or all of your available credit on the car, then any direct debits or other regular payments may no longer be possible on your credit card. Also note that you may not enjoy interest-free days on new purchases while carrying an outstanding balance on your credit card.

Other financing options for buying a car

Apart from using your credit card, you may also want to consider the following options:

  • Car loans. In general, car loans offer more affordable interest rates than credit cards over longer periods of time. You can easily find loans offering interest rates below 10% over 1-7 year loan terms, which may have a lower impact on your cash flow and interest expenses over time.
  • Personal loans. You may also wish to look into personal loans, which typically offer more competitive standard interest rates than your credit card. Personal loans can be secured or unsecured, and will also likely have a lower impact on your finances over time than a credit card debt.
  • Savings. If you can wait for it, the best thing to do would be to pay for your dream car in cold, hard cash. Of course, you could still choose to pay with your rewards credit card to earn rewards, but the point is to avoid paying any interest fees whatsoever on your new set of wheels. Consider earning interest on your hard-earned money instead with a savings account.

Example: Buying a car with a credit card vs. a personal loan

To get an idea of the different potential costs, let's say we're looking at a used car that costs $6,000 and have the following financing options:

ProductInterest rateTermMonthly repaymentsSurcharge/ Loan application feeTotal cost
Car loan10% p.a.2 years$277$195$6,840
Low rate credit card13% p.a.N/A but planned for repayments over 2 years$286$120 (2%)$6,964

Based on a 2-year repayment period, paying for this new car with a credit card costs $124 more than getting a personal loan. But the rates and fees you get can vary for cards and loans. So if you're comparing different options, you could also get an idea of the different costs by using Finder's credit card repayment calculator and looking at the details of different used car loans.

Buying a car with your credit card may or may not be the wise thing to do – it really depends on your circumstances. When weighing up your options, remember that the cost of interest builds up over time and can add to the cost of your car. So once you find a car you want to buy, take a look at a few different ways to pay so you can find the one that works for you.

Compare credit cards with high credit limits for buying cars

Name Product Purchase rate Balance transfer rate Annual fee
Citi Rewards Card - Balance Transfer Offer
21.49% p.a.
0% p.a. for 30 months
$49 annual fee for the first year ($149 p.a. thereafter)
Save with a $49 first-year annual fee and 0% on balance transfers for 30 months with no balance transfer fee.
HSBC Platinum Credit Card
19.99% p.a.
0% p.a. for 36 months
$29 annual fee for the first year ($129 p.a. thereafter)
Save money with a 0% balance transfer rate for 36 months (with no BT fee), a first-year annual fee discount and free travel insurance.
Citi Rewards Card - Velocity Points Offer
21.49% p.a.
0% p.a. for 15 months
$99 annual fee for the first year ($199 p.a. thereafter)
Enjoy up to 150,000 bonus Velocity Points (80,000 when you spend $3,000 in the first 90 days and 70k after 12 months).
Qantas Premier Platinum
19.99% p.a.
0% p.a. for 18 months with 1% balance transfer fee
$225 annual fee for the first year ($299 p.a. thereafter)
Earn 80,000 bonus Qantas Points when you spend $4,000 in the first 3 months, 80 bonus Status Credits on eligible spend and a reduced first-year annual fee. Ends 29 Sept 2021.
Citi Clear Card - Balance Transfer Offer
14.99% p.a.
0% p.a. for 28 months
$49 annual fee for the first year ($99 p.a. thereafter)
Offers 0% p.a. on balance transfers for 28 months with no balance transfer fee and a discounted $49 first-year annual fee.
Citi Rewards Card - Points & Gift Card Offer
21.49% p.a.
0% p.a. for 15 months
$49 annual fee for the first year ($149 p.a. thereafter)
Receive 90,000 bonus Citi reward Points (worth $400 in gift cards) and a $100 Coles eGift Card when you spend $3,000 in the first 90 days.
Bankwest Zero Platinum Mastercard
14.99% p.a.
0% p.a. for 26 months with 2% balance transfer fee
$0
Get 0% p.a. on balance transfers for 26 months (with a 2% BT fee), ​an ongoing $0 annual fee and 0% foreign transaction fees.
Citi Premier Card
21.49% p.a.
0% p.a. for 6 months
$150 annual fee for the first year ($300 p.a. thereafter)
Enjoy 130,000 bonus points (worth $450 in eGift cards) when you spend $4,000 within the first 90 days. Plus, a first-year annual fee discount.
NAB Qantas Rewards Signature Card
19.99% p.a.
0% p.a. for 6 months with 2% balance transfer fee
$295 annual fee for the first year ($395 p.a. thereafter)
Earn up to 110,000 bonus Qantas Points (90,000 when you spend $3,000 in the first 60 days and 20k after 12 months).
Virgin Australia Velocity Flyer Card - Balance Transfer Offer
20.74% p.a.
0% p.a. for 28 months
$0 annual fee for the first year ($129 p.a. thereafter)
Get 0% p.a. on balance transfers for 28 months and a $0 annual fee in the first year. Ends 30 September 2021.
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