Is buying a car on a credit card a good idea?

timsk

I'm about to buy a new car, and I've got the cash to pay for it immediately. However, I'd like to pay for it with a credit card (which I'd pay off at the end of the month) to get the extra protection that this usually brings, i.e. section 75 of the Consumer Credit Act 1974.

The salesman at the car dealership strongly advised against it, saying that "if you pay for it by credit card, then the car's not really yours, even after you pay off the credit card bill; there's an odd kind of arrangement involving you, us and the bank, but it's a can of worms you don't want to get into". When I talked about the Consumer Credit Act 1974, he said he believed there was an exception for purchasing cars. And the finance bloke at the dealership put it more straightforwardly: "We don't take credit cards, full stop." He couldn't really tell me why; they just don't.

Having benefited in the past from my bank leaning on a major vendor to give me what I was reasonably asking for, I'd rather like to have the same backup if something were to go wrong with my car.

Does anyone have any experience or concrete information about this? Is it true that it's not in my interest to use a credit card to buy a car? (Why not?) Is it normal that a franchised, apparently reputable dealer, who's listed on http://www.rmif.co.uk, refuses credit cards?

Thanks in advance for your help.

mrtg0525

I think this is actually pretty normal that car dealers don't like taking credit cards as they have to pay a percentage of the transaction amount to the company providing their merchant account. Margins on cars alone aren't that big so the CC fee may eat up most or all of their profits. Debit cards mostly incur a fixed amount per transaction so that's usually not a problem.

testertrev

They obviously don't need to reach any sales targets at the moment, vote with your feet and look for a dealership that does.;)

missile

I paid part with CC, Audi salesman said they only accept up to £2000 on CC. So I gave him two. My Nationwide has cash back and &More card is interest free for 12 months.

PS: I guess you really intend paying with a cheque? If you pay "cash", I understand over a certain amount, the dealer will be obliged to report you under money laundering regs.

inmypocketnottheirs

It really is up to the dealership whether they accept cards or not.

If they do, then there is no valid reason why you should not take this option.

You will of course get the section 75 protection you refer to, but you would get this as long as you put at least £100 of the purchase on the card.

However, if you have a cash back or reward car (airmiles etc) then obviously the benefit to you is greater.

If the dealer accepts cards is trying to persuade you to pay cash, then this is for his own gains (i.e. allowing him to manipulate the amount you paid for the card to reduce his VAT bill etc). I would then feign disinterest and make noises about looking elsewhere. He won't want to lose the sale for 2-3% merchant costs.

Finally, margins on cars are probably higher than realised. On new vehicles, margins are around 12-15% plus incentives (often up to another 10-15%), plus finance and insurance commissions (hence why they try to push you in to a 'low' rate finance deal). Second hand margins are significantly higher, often around 30-50% or even more.

HTH

timsk

Thanks for the replies. I hadn't realised it was a standard(ish) thing for dealerships to refuse credit cards. It's probably not as onerous as I originally thought then, although it would be nice if a clearer explanation as to why they don't accept them were forthcoming (from the dealer, I mean).

And yes, when I say "cash", I mean Maestro/banker's draft/something similar. I could ask the bank for used tens and twenties, but that does tend to raise eyebrows. :-)