Buying a car with a credit card in the UK can offer several benefits, but it also comes with risks and limitations. Here’s a clear breakdown of the main benefits, followed by cautions to consider:
✅ Benefits of Buying a Car with a Credit Card in the UK
1. Section 75 Protection
- Under the Consumer Credit Act 1974, purchases between £100 and £30,000 are protected if paid (even partly) by credit card.
- If the car is faulty, not delivered, or the dealer goes bust, the credit card provider is jointly liable with the seller.
2. Spreading the Cost
- Using a credit card allows you to spread the cost over time without needing a loan upfront.
- You can manage payments via monthly instalments, especially if your card has:
- A 0% interest offer on purchases, or
- A balance transfer deal.
3. Reward Points or Cashback
- Many cards offer cashback, air miles, or reward points for spending.
- On a high-value purchase like a car, this can lead to significant rewards.
4. Interest-Free Credit (0% Purchase Cards)
- Some credit cards offer 0% interest on purchases for 6–24 months.
- You could buy the car and pay no interest if you clear the balance during the offer period.
5. Emergency Financial Flexibility
- If you need a car urgently and don’t have the full amount in cash, a credit card offers instant purchasing power.
⚠️ Important Limitations & Cautions
| Issue | Details |
|---|---|
| Dealer Acceptance | Many car dealers in the UK don’t accept full car payments by credit card due to transaction fees. Some accept part payments (e.g. £1,000 deposit). |
| High Interest Rates | After promotional periods, credit card interest can exceed 20–30% APR, making it more expensive than a car loan. |
| Credit Limit | Your credit card must have a sufficient limit to cover the cost. Most cards won’t support full car purchases over £10,000+. |
| Impact on Credit Score | Using a large portion of your available credit can temporarily lower your credit score. |
| Fees & Surcharges | Some dealers may add a surcharge (e.g. 2–3%) for card payments, increasing the total cost. |
🔹 Recommended Strategy
- Pay just the deposit (e.g. £100–£1,000) by credit card to activate Section 75 protection, then pay the rest via bank transfer or loan.
- Use a 0% purchase card if you want to spread the cost and avoid interest.
- Check with the dealer in advance if they accept credit cards and whether there’s a fee.