Buying a new car with credit cards instead of car loan?

Say that someone wanted to buy a 25'000 dollar new car, such as a Honda Civic or a Toyota Corolla.

The person has a couple of high limit credit cards with no balance.

Could it be beneficial to buy the car outright with the credit cards as opposed to dealer financing?

Because I see 3 benefits of this.

1. The minimum monthly payments on the credit card will likely be significantly lower than a monthly car payment.

2. If you fall into any financial difficilty and default on payments, no one can repossess your car.

3. On a more unrelated note, if you don't plan on buying anything on credit for the next several years, you could pay on the credit cards for six months or so, then declare bankruptcy, and you've got yourself a brand new car for about a thousand bucks spent.

Are there any cons to go with the pros?

1. Credit cards usually have a much higher interest rate than a standard vehicle loan. If your credit score would be high enough to have credit cards with the kind of credit limit needed for that purchase, then the you would also probably qualify for a very low interest rate on a vehicle loan. Most credit cards, even the best ones, still have about a 13% interest rate. A vehicle loan on good credit will usually have about 4% to 7% interest rate. Basically, you may make lower payments on a card, but you will pay more for the vehicle because of the interest rates.

2. In a bankruptcy, you first must prove that you can't afford to pay your debts. Then second, you can and might be forced to sell anything that has enough value to help cover those debts. Therefore, you might not get to keep that new vehicle in a bankruptcy. (If it is your only vehicle, then you would probably get to keep it, but if you have other vehicles, you might be forced to sell things to cover the debts you are filing against.)

They don't take credit cards for that. I wanted to do it and they said nope. Down payment, yes, full price nope.

It almost unheard of that a dealer would accept the whole paument with a CC, since they often put limits on the transaction some of then just 2k or 3k max. Check with the dealer how much they would accept in the transaction with credit cars. Powerful Hint… When you ask for a quote require the Out the door(OTD) price meaning the car with options taxes and fees.

Cons are your interest rate w/credit card will be between 13-27% and I can get a car loan at 3.9% from my credit union 2.9% if they are running a special or sometimes 0% from dealer.

To pay off that loan at 27% for $1,000 per month w/credit card for 20 years. At 3.9% its $459 a month for 5 years.

Sure you could pay the minimum payment but you would be paying… And paying… And paying.

No. Based on your list, there are no pros, only cons.

1. The minimum monthly payments on the credit card will definitely be significantly higher than a monthly car payment.

2. If you fall into any financial difficulty and default on payments, your credit score goes way down, so the cost of your car insurance goes way up. If you can't even afford the car or credit card payments, then you definitely won't be able to afford the higher insurance payments, which can often be thousands of dollars more than the car or credit card payments. If you can't pay for the insurance, then you can't drive the car, so it would be better if someone could repossess your car. Because they don't, you'll have to keep paying for registration and possibly parking, even though you can't use it.

3. Even if you don't plan on buying anything on credit for the next several years, you can't just pay on the credit cards for six months or so, then declare bankruptcy, and have a brand new car for about a thousand bucks spent. First, when you declare bankruptcy, your debts aren't automatically discharged in full; they are simply lowered to the value of your assets (what you own). If you have a new, expensive car, that's going to really hurt your position. Either you'll still owe on the credit cards, or you will lose the car, or both. Also, as with defaulting, your credit score goes way down, so the cost of your car insurance goes way up. If you can't even afford the car or credit card payments, then you definitely won't be able to afford the higher insurance payments, which can often be thousands of dollars more than the car or credit card payments. If you can't pay for the insurance, then you can't drive the car. So it's just an expensive paperweight that you can't use.

1. Making only the minimum payments will mean that it will take you LONGER than the car loan to pay off because the interest can be anywhere from 5x - 20x higher.

2. If you default on your payments it still grossly affects your credit, and if you let it get bad enough they will repossess ANY assets you have, car, home, items, etc.

3. Declare bankruptcy? You're either trolling or an idiot. Get yourself a serious financial education.

No pros, just cons. Your pros are faulty analysis.

Your credit card issuers will know that you purchased a car. If you file BK, they might be able to challenge the purchase and have it removed from your BK filing. That would make you responsible for the credit card debt. If's called fraud. Filing BK shortly after a large purchase like a car will almost guarantee a fraud conviction and your BK will be disallowed.

To file BK, you have to do a "means" test. That test determines if you have the "means" (financial resources) to pay your debts. If you do have the means, you can't file BK. They also look at your non-exempt assets as a source of financial resources to be sold off.
It's possible your minimum payments on the cards will be higher than if you finance the car. Minimum payments are about 3% of your balance. 3% of $25,000 = $750/mo.

The interest rate on the cards will always be higher than a new car financing loan. Card = 15%-18%, new car financing 3.9% With a lower interest rate, the pay off will be sooner with a car loan.

You would save on full coverage insurance. But would you want to assume the risk of paying $750/mo for a car that you no longer can drive? The lower car financing loan rate would allow enough money to pay for full coverage insurance.

Car dealers will not take a credit card for a sale. I tried to buy a motorcycle on a credit card & it was not allowed. They are afraid you will default on the credit card & they will not get paid. You could take a cash advance on your credit card if your credit is good enough but you should be able to get a car loan with a better interest rate than the credit card.

Credit cards cost the merchant 5%. A car dealer takes it only to make the sale usually for down payment if needed or if selling the car undiscounted. People with credit limits that high use the card for its rebate and benefits, not to buy a car. They buy cars for cash or extra low factory financing. They rarely pay interest on a credit card which runs 12 to 25% APR usually. They don't need 30 years to pay off a car.

Car dealers will not take a credit card for a sale