Buying a Car on a Credit Card – Everything You need to know

By | December 25, 2018

Buying a car on a credit card is certainly a wonderful feeling as we can get a car out of nothing, literally. I mean no loan paper docs, no sign, nothing. Just a single swipe and you can take home your car with a lot of reward points!

There are even couple of readers here who reported that they had bought a car on credit card and its good to see how they’re maximizing the high value spends for reward points.

If this is running on your mind too, here’s everything you need to know about buying a car on a credit card.

Buying a Car on a Credit Card (Image Credit: Autotrader)

Can I actually Buy a Car 100% on card?

Almost all car showrooms “will accept” credit card as a payment option for paying the “booking amount”. The booking amount usually is around 5-10% of the car value.

In my personal experience, most car showrooms (like VW, Skoda) will accept transactions upto 1 lakh as booking amount on credit/debit card and not beyond that, as it hits their margin. Sometimes it can go as high as 3 lakhs on premium cars.

But other than booking amount, most showrooms will not accept the remaining amount on card because they’ll loose ~1.75% (transaction fee) or so on the charge. It’s even worse on Amex Cards as they loose about ~2.5% or so.

So in this case you may try to:

  • Stretch the booking amount a little further,
  • Bargain on the transaction fee share for the remaining amount.
  • Or, simply absorb the full txn fee

As long as you’re holding one of the super premium cards, you’ll anyway end up in net profit even if you absorb the full fee. But, the common issue here is most of us don’t have such high credit limit.

So yes, technically you can buy a car on credit card. But, should you do it or not? That covers the rest of the article, read on,

Fun Fact: If you’re holding Amex Gold charge card with high limit hoping one day you can swipe your card to take home a luxury car, forget it, as Amex rewards are too low to cover the txn fees.

When You should buy?

1. If you’ve enough liquid cash

If you’ve enough liquid cash sitting idle that you couldn’t invest anywhere, then yes, You can happily go and swipe your card and payback in full the next month.

This way, you’ll get lots of points & miles that’s good enough to cover a weekend domestic trip.

Those who’re thinking about buying car on card usually belongs to this segment. But this is not a wise idea, unless you get outstanding returns on spend, like 5% or above.

Tip: Time your spends to achieve the milestone rewards or to fulfil the spend based offer.

2. Low EMI Rates

If you donot have liquid cash but still have a high credit limit with an irresistible EMI offer, you can make use of it. For example, Yesbank recently came up with 9.90% ROI on EMI which is almost same as the ROI given for car loan. 

Paying by credit card is a good idea in this case because you don’t need to get into all those documentation & hypothecation stuffs on your RC!

If you belong to this segment, usually you’re in <10L range car. If you’re looking for >10L segment cars, you probably need to read the next topic.

When You shouldn’t buy?

Note: This section is beyond credit cards and more about personal finance.

Basically paying 100% of the amount (either by card/EFT) for a car (or) a home loan is not the right way to handle money, especially when your lifestyle is well settled with basic needs. Let’s see why!

1. If you’re a Businessman

If you’re running a business, you shouldn’t buy a car with full cash because you’re investing in a depreciating Asset

You could rather invest the same amount on Stocks/Mutual funds or even better – in your own business that can fetch you more returns than your Car loan ROI. 

For example, if your investment in stocks gives 15% returns and if you’ve taken a car loan at 10% ROI, you still save 5%. If we are talking about a 10 Lakh car loan, you’re saving sweet Rs.50,000. 

More than 90% of the luxurious cars (Audi/Merc/BMW) that you see on road are on loan for a reason. Its not that they can’t afford to pay full, but they know a way to get better returns on the money than buying it upfront.

Apart from that, if you’re in 30% income tax slab, this will save you on income tax front too. 

2. If you don’t like Taxman

If you’re buying a car by paying 100% upfront, this “may” trigger a flag on your PAN for a review. This maynot be true for small cars in ~5L range, but for bigger cars, chances are higher.

You still don’t need to worry, as long as your ITR supports the spends.

Most of us are not trying to evade the tax system, but dealing with taxman is still a time consuming process.

3. For a better CIBIL Score

One of the factor that decides your credit score (CIBIL/Experian/Crif) is your credit mix. Meaning, you need to hold good mix of Secured loan & unsecured loan.

Fortunately as car loan is a secured loan (good debt), having it on your profile will certainly improve your Credit score.

This is quite important if you’re dealing with too many cards, as having secured loan on profile is a good sign for the issuer to give you a better credit limit or even for card approval at times.

Bottomline

So, should you buy a car on credit card? Yes & No. There is no single answer for this as each of our profile is different. It depends on one’s financial situation and lot other factors as mentioned earlier.

But if you’ve a credit card that gives significantly higher rewards its perfectly OKAY to buy your dream car on a credit card 🙂

What’s your take on buying on a car on a credit card and do you like these crazy topics? Feel free to share your views in the comments below.

Author: Siddharth

A Credit Card addict, minting reward points & air miles for years. Obsessed with aviation, airport lounges and luxury hotels. Helping Indians choose a right credit card and enjoy luxury travel at affordable cost.

60 thoughts on “Buying a Car on a Credit Card – Everything You need to know

  1. Shubham Gupta

    @Siddharth,
    I am regular reader of your blog and follow every story.
    I will always advise to pay for a car using any Credit Card as long as we don’t have any previous outstanding balances and are not being charged any transaction fees.
    Since demonetisation, literally all car companies have started accepting credit cards for payments.
    Not only do we save money in terms of interest (for around 30-50 days), we also earn points (more points on Premium Cards and on those which offer higher incentives on threshold spends).
    If the limit on the card is low, we can add money on the excess of the card limit totalling to the amount which has to be paid.
    I have heard problems involving taxmen, but that is only if the outstanding of the credit cards are paid using unaccounted cash.

    Reply
  2. Amex Guy

    All this is true and great information (I paid around 25% of my car on Amex in April), except the taxman part. I spend over 10L consistently on my fav cards and have never once got a notice, even when the threshold was 2.5L. Moral of the story is — if your spends match your returns, don’t worry.

    For smaller cars, the transaction size isn’t big enough. And if your car is over 10L, there will be TDS deduction anyway from the showroom. So using CC doesn’t really increase exposure to taxman anymore than it will be anyway.

    Regarding luxury cars, since leasing has gone to dumps because of GST, manufacturers are giving out low ROI loans with guaranteed buy back. Best way to drive one today.

    Also, if one holds Amex Plat or Centurion, check the Auto program. May not work with manufacturer of choice but worth a try.

    Reply
    1. Siddharth Post author

      Ah yes, updated content on IT Returns part.

      I’ve been exploring leasing recently. Because of GST as in? Service tax was there anyway isnt it?

      I wish we’ve an affordable service, like a “cheaper Zoomcar” so that we don’t even need to buy a car 🙂

      Reply
    2. SH

      Amex Guy,

      Always something new from you..:-). What is the Auto Program? Pls throw some light.

      Sid,
      Great post. I was reading this last evening as we were having our Christmas dinner – to the bitter irritation of my wife. Even if the tax man does not come after you, my wife will..:-)

      Cheers!
      SH

      Reply
  3. Nikhil Goel

    @siddharth

    M buying a Jaguar XF next week. Will try making the down-payment using the cards in my disposal. Will let you know as soon as I get the information from the dealer.

    Reply
  4. Himanshu

    Buying a car on credit card is really cool but most of the cardholders are not issued with the high credit limit. If one has AMEX charge cards or super premium cards with high limit it will be great.

    I’m in a process of building a good credit history with good credit behavior. Let’s see in coming years I’ll be able to get some super-premium cards with the high limit.

    Reply
  5. pradeep shaw

    I recently buy baleno on credit card. every one has surprised to know that i had buy the car with credit card with CSD and nobody belives it. I save almost 25000 by paying with credit card.

    Reply
  6. AJAI

    I paid 5lac as advance for a Skoda Octavia in HP thru DCB but was not given all the points “Capped maybe?”. It helped up my rep over the bank and the CC team but still not enough for a HDFC Infinia 🙁

    Now my DCB has been downgraded to a Regalia to get a PP for my wife and still they are not giving me Infinia access even after Preferred+ “No Imperia in branch” relationship and double digit lac transactions every year. Don’t know how to get that bloody card.

    Reply
    1. Siddharth Post author

      They’re not capped for sure. Did you check with DCB support?

      Reply
      1. AJAI

        I sent a mail to them and they said that it is not retail spending so I am not going to receive reward rate at 5 per 150.

        Even after sending them the receipt for the car I got nowhere since they have classified that point of sale something other than retail.

        Thanks to the hidden way HDFC rewards points I do not know how much I got from that transaction since it was a mixture of all the spending I had done that month ‘9lac’ but it was much less than (900000/150)*5.

        Do it wise about how to get an infinia lifetime free or can I hold DBC along with my regalia, since regalia has a poor reward rate compared to DCB and that forces me to use Axis Select card with 20x bonus retail spending RP.

        Reply
      2. AJAI

        Got this replay from HDFC in mail:

        “Sir the transactions at the Merchants with MCC code not included in retailers list avalible with HDFC will not be considered as retail spends.”

        Reply
        1. GTMAX

          But a car showroom should ideally be classified as a “retail establishment”. You should have escalated this.

          Reply
    2. Anand

      It’s not wise to downgrade a card simply for pp access better open a family account and make her preferred customer along maintain good balance in her account u could easily get a pre approved card within 6 months span which can get her lounge access my mom got diners club miles same way

      Reply
      1. AJAI

        The problem was that we required her pp before Feb 2019 since our trip is in the first week. I also have made them part of my preferred account but eligibility will only come post May 19.

        Does the pre-approved card come via net-banking ?

        Reply
        1. Abhijeet

          Hey Ajai,

          Get your wife a HDFC account and get her Rupay platinum debit card which gives 2 international lounge access in a financial year. Saves you a lot of hassles to get PP. Rupay platinum Debit card comes at 200 INR per year.

          Cheers, Abhijeet

          Reply
          1. Sumeet Gupta

            I think rupay platinum debit use is limited to domestic lounges, whereas rupay credit will work in international too.

  7. Majumdar

    I purchased a Wagon R on exchange of an Alto (net cost was around 4.5 L) with my Infinia CC in March 2018 (if I remember the date right). The dealer was asking for 2% premium as service charge but was able to negotiate down to 1%. Also the whole payment was broken into an advance of Rs 1 L and final payment of Rs 3.5 L or so. Was able to get that 1% too waived on the advance. So effectively paid 0.8% extra.

    The base reward rate of course is 3.3% plus there was some milestone bonus RPs in that month. So effectively ended up getting a little over 4% return as RP and expense of 0.8%. So net RPs was over 3.5%.

    Regards

    Reply
  8. Imran

    I bought Maruti swift dZire in 2008 from Sai service Parel, Mumbai on credit card. The total amount was 660000/- I had to use 2 credit cards due to available limit. It’s a different story now. I can buy an Octavia with just one of my cards. I remember to have used Barclays credit card (which I think is taken over by stanc ?) and hdfc card. So I guess I am decade ahead of this article 😜

    Reply
  9. Abhishek Roy

    I still remember, 2 years back, I bought a bike for my brother. I just paid on his behalf. We had a plan in the process. My wife had got a DC Black that time. She did not get first year free. Atleast that’s what we were told. So the card came with a joining fee of ₹10K. I had to spend ₹1lakh within first 3 months to waive off my joining fee.

    Then I made a plan. My brother wanted to take a bike. I found out that at that time Paytm was selling bikes online. I mean the entire showroom price could be paid through the Paytm. The only other part that needed to be paid was the road tax etc. So I made a payment of ₹84K (ex showroom price) for the bike from Paytm with our DC Black card. That time an offer was there of ₹5K cashback on bike booking from Paytm. So I earned a cool 3.3% RPs + paid ₹84K or my ₹1Lakh criteria for joining fee waiver. At the same time my brother got a cashback of ₹5K from Paytm. He only had to pay around ₹16K more with cheque directly to the dealer.
    Beat that!!!!!!!

    Reply
  10. Shiva

    Hello Siddharth,

    I’m planning to buy a car in the near future and I’ve been thinking of using my CC for the payment as well but my CC limit is 2L. With that I surely cannot buy a car, I’ve been with HDFC for over 4 years and have a Regalia First card. How do I upgrade the card and the limit as well. I spoke with my account manager (RM) regarding this and she is of no help. My salary is around 72k per month and have over 5L in my savings account with HDFC.

    Reply
  11. Himanshu

    Hey Shiva,

    How old your card is? Send your docs either salary slips/ITR to Chennai with limit enchancement form.

    Try to use your card more. Hit 90% limit in 6 months or so. It has worked for me.

    Reply
    1. AshishR

      “Hit 90% limit in 6 months or so”

      so example limit is 4 lakh
      do you mean to spend 90% of 4 lakh in 6 months?

      Reply
      1. Himanshu

        No, I actually mean try to use 80-90% limit in a month once in 6 month to a year. So that lender can see that user needs higher limit. It’s easy for lender to consider while there will be no effect on your score.

        Reply
    2. Shiva

      Hello Himanshu,

      4 yr old card.

      After dropping my comment I checked my netbanking and found my limit has been raised to 5L. 🙂

      Thanks.

      Reply
  12. Priyansh Modi

    I have multiple cards, so I guess my use of diners premium has been limited.

    But basis what I read, chances of an upgrade being offered is high if I use diners premium a lot?
    I don’t have required ITR, though dmat is with HDFC and can also may be arrange some funds in savings if needed.

    Would love to hear any suggestions or tips to get DCB

    Reply
    1. Himanshu

      High spending on your cards and high relationship with bank like s/b account,current account,loans, insurance+ you need RM/BM help for upgrade otherwise eligible ITR is required.

      Reply
  13. Vivek

    Hi,
    Is it possible to pay beyond your limits?
    Both my cards have a limit of 2L, so can I prefund one card’s account with 2L to get an overall limit of 4L to buy a car or any other purchase.
    Thanks.

    Reply
    1. Priyank

      Yes, it is possible.

      However, better will be to keep some margin and load amount such that the credit limit utilization is in between 90-100% and not precise 100%

      Reply
  14. Ekas

    Hey !
    I’d like to know what’s the highest limit on a credit card in India for individuals and Business ? Also, which CC are those?

    Regards

    Reply
      1. Shivi

        It actually does. NPSL doesn’t mean an infinite credit limit.

        I was quoted spending power of up to 50 Lakhs for the first year, enhanced to 80 lakhs in the second year & 1 crore and beyond subsequently. We are ofc talking of monthly credit limit and case to case/ individual to individual basis.

        Reply
        1. Himanshu

          Shivi

          As you have said every account has been given upper limit. My ques is suppose someone spent say 10-15 lac in a month. What will happen to cibil score/ profile.

          As the score gets down when you use high limit on the card.

          Reply
          1. Shivi

            CIBIL score does not take a hit if you spend high on your credit card, Himanshu. It is how you spend and repay. Make multiple payments to your credit card to bring down the outstanding balance though again, there is no hard and fast “rule of 30%”. I have been maxing out my Amazon Pay card every month lately (low credit limit of 38K) without any visible effect on CIBIL (yearly subscription). Just don’t default on your payment! I pay in full within a week of my cards statement generation date.

    1. Shivi

      For individuals, it is 10 lakhs on a non-secured line and up to 25 lakhs on a secured credit card line (against FD). For businesses, it is up to 1 crore. This is on paper; might be more for Super HNI/Private clients/ corporate powerhouses.

      Reply
      1. Amex Guy

        This is obviously wrong info. I have over 10L limit from multiple banks, including some known stingy ones, and I am no mega-honcho, I mostly eat at McD.

        I’m not even factoring NPSL cards like Infinia and Plat, because that’s not revolving limit usually.

        Reply
        1. Shivi

          Quoted by StanC (non-secured- chatting over the phone @ Chandigarh) and Axis Bank (secured – branch visit @ Shimla). This has nothing to do with your lifestyle or in some cases even the ITR. Hey, I live in a village with Infinia and Prestige cards myself!

          Generally speaking, there is no upper limit then as BipLav ^ mentioned, once you cross over to the premium side (NPSL cards).

          Reply
  15. Shiva

    Is it possible to double my CC limit to 10L on my Regalia First card? The car I’m eyeing is around 11L on-road.

    Reply
    1. Shivi

      Check with HDFC card customer support; they may not allow the pre-funding to such an extent! Also, if you do not get the corresponding RP, it will be waste of time, money and resources to have undergone the whole process for nothing!

      Reply
  16. Amar

    I bought a car today from Nexa showroom.
    Despite a very hard bargain they charged me 2% for using my credit card.
    For debit card, there was no charge and hence I used my Citigold card for 1.5 Lacs (max per day limit) to earn 1% on that.
    For remaining amount, I paid through HDFC Infinia, DCB and SCB Ultimate out together just to spread out the risk just in case some bank doesn’t give me the points.

    Reply
    1. AshishR

      congraz of new car amar,

      let us know which cards didnt give pts for car purchase

      Reply
      1. Amar

        Citigold world debit card reward rate is 1% (and NOT 2%) for sure. As for Limit, I tried 6 lacs first, it was declined. I then called up my RM who told me it is 1.5 Lacs.

        Reply
  17. Maneesh Singhal

    I have Corporate Amex card and I have charged upto 30 lacs. Among my personal card hdfc Infinia card has limit of 16 Lacs and once I utilised 15 Lacs of it. Citi prestige has 15 Lacs. Few other low variant cards have limit around 10 Lacs. I have an eye on yes private or amex centuriun but didn’t got the invite yet.

    Reply
    1. Amex Guy

      If you’re spending on Corporate Plat, Amex is looking for 1.5 crore a year spend and they have a tendency to discount whatever they consider business spends from that threshold. Spend on a personal card if you are into getting a Centurion with under a crore spend. If you hold both personal and corporate, combined spends of both cards will be considered for Cent, but they will discount a lot of corporate spends.

      Reply
      1. Maneesh Singhal

        Thanks Amex Guy
        My corporate Plat amex expenses was about 1.2 crores last year, and roughly around 90 lacs in the preceding year.
        I hold the personal amex plat card as well but yearly expense on it are in order of 25-30 lacs only. So if I combine both the expense, it is close to 1.5 crores for last year. Hopefully this year it will be much more. I prefer using my UK credit cards for personal international expenses as they 0 forex charges and exchange rates are much better.
        Is the invite for centurion automatic or should I drop a note to Amex to consider for the possible upgrade. Also do you hold the centurion card.

        Reply
  18. Amar

    An update on the points –
    I got points for all the cards.
    And yes CitiGold is 2% – my bad and I look like a fool now.
    Should have paid everything through that as no charges were levied by the dealer on that.
    Also lambasted my RM for giving me incorrect limit detail – it is indeed 5 Lacs.

    Reply
  19. Amann

    Hi Sid

    Can you review citi gold & it’s world debit card. Seems to be very good for HNIs.

    Reply
    1. Shivi

      You missed out on a small detail here, Amann ~ CitiGold account variant requires NRV of over 75 Lakhs 😀 CiTi has started capping the RP earned on the CG World Debit card on all categories of spends even excluding a few vital ones AND most of its’ running offers will expire on March 31, 2019!

      Reply
  20. Hardik

    Bought a Tiago JTP in Mumbai for Rs7,20,000 using two credit cards, Diners Club Black and Standard Chartered Ultimate. Now it remains to be seen how much points I get against them. I was charged 10,400 on 7,20,000 (1.45%) after bargaining. I divided them into Rs4,50,000 from SCU and Rs280400 from DCB given a previous comment that HDFC gave less points for a car purchase.

    Reply
    1. Praveen Katiyar

      @Hardik
      Congrats on new car. Thats a nice negotiation on trxn charge. Iam eager to know your points journey on these trxns.

      Reply
    2. AshishR

      nice deal hardik

      you gave them 1.45% annd got yourself 3.33% worth of RP

      Reply
    3. Hardik

      I received 15000 points against my Standard Chartered Ultimate Card. I will have to wait for my Diners Club Black statement to see if I received points for that particular transaction. The Standard Chartered transaction has in itself covered the transaction cost 🙂

      Reply
    4. Hardik

      I am glad to report that I got 3.3% points on HDFC Diners Black credit card as well.

      Regards,

      Hardik Parikh

      Reply
    5. Gagan

      Thanks @Hardik for sharing details. Can you share what was the initial ask on credit card charges by the showroom guy?

      Reply

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