It’s not the best financial choice to use your credit card for a down payment on a car.
First, some dealerships will not accept funds from a credit card as a down-payment. The dealerships that do, usually have a limit and the limit can be a dollar amount or even a percentage of the down-payment. You’ll have to check with the dealership to see what their policy is.
Using your credit card for a down-payment means that you’ll be in debt to two new creditors and that means 2 new monthly payments: your credit card and the bank that the dealership uses. That’s a lot of debt for one financial choice.
Depending on the APR (interest rate) on your credit card, it will cost you a lot in the long run. You might end up paying double what you originally charged if you don’t pay your credit card off in a timely manner.
- Join a credit union and ask about their loans. Credit unions have much better rates than credit cards. You can even see if the credit union will finance the whole car amount.
- Carpool or use public transportation and save for the down-payment.
I know you’re probably saying… but I don’t have any money left over in my budget. I challenge you to know for sure. Create a budget to figure out where your money is really going and how you can cut back. If you’re currently not driving, then you wont be paying for gas and insurance, use these savings to put towards the down payment.
Get a previously owned vehicle. In my opinion, buying a brand new car is a big waste of money. Instead, buy (finance) an almost-new car; one that is 1-5 years old. You’ll save thousands of dollars and there’s not much difference between a new car vs. a 2-year old car except the price.