Using a Credit Card to buy a car

Using a Credit Card to buy a car

We explain what you need to know about getting a new car with a credit car and explain what you should consider about this method.

What you should know about using a credit car to get a car?

A credit card lets you spend money on credit (borrow it from the bank). You can spend up to your credit limit, which might be a few hundred or thousands of pounds, depending on how confident the bank is that you can pay it back.

The annual percentage rate (APR) is the easiest way to compare loans, and essential in working out how much a loan will cost you over its lifetime. If the APR isn’t clearly mentioned, then ask for it. The headline rate isn’t necessarily what you’ll get; it can vary, depending on your credit-worthiness.

It is usually advisable to pay off the bill every month. If you do, you won’t pay interest on what you borrow. If you don’t pay the bill off in full, the interest can be very high.

It’s usually backdated too, so if you bought something at the start of the month you’ll be charged a whole month’s interest, if you don’t pay it off in full.

Points to consider

Before deciding whether or not to use a credit card to get a car, there are a few more factors worth considering first:

· High interest. If you don’t clear your balance at the end of each month, you’ll have to pay generally high interest and charges.

· Beware the debt spiral. Miss just one payment and the interest will start to add up. Unless you pay off what’s owed each month, you can quickly spiral into debt.

· Most retailers will charge an additional fee for a high balance purchase using a credit card.

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