Why should dealers tell you what you can and can’t charge to your credit card? Cars represent a jackpot of credit rewards that every consumer is entitled to collect. There’s nothing stopping from charging your new car straight to your credit card, if you storm the dealership armed with the right tools…
Dealerships loathe credit cards for two obvious reasons:
Fees: The 2% transaction fees easily costs a dealer several hundred dollars.
Financing: Dealers receive lucrative incentives for arranging financing. They don’t want the credit card companies having all the financial fun.
Just because you can use a credit card doesn’t mean you should. Dealers factor the method of payment into their negotiations, and asking to pay with a credit card could jack up the price and deprive you of leverage. Even worse, financing your car on the back of your credit card could be a risky financial bet. That said, if you can pay off the car relatively quickly, your credit card can provide a windfall of cash back or frequent flier miles.
Convincing the dealer to accept plastic requires a copy of the cardholder agreement and a few shots of tenacity and persistence. First, negotiate the price of the car. Then, calmly explain that you’ll be paying with credit.
Sound outlandish and ridiculous? Fine, don’t trust us. Trust Matt Fadiman, Vice President of Riverbank:
…as per both the MasterCard and Visa merchant agreements, a participating merchant must accept that credit card (assuming it is valid and approved) for all purchases. The merchant cannot, by policy or practice, decide which transactions it will allow and which it will not.
I do agree that in reality many dealerships will attempt to refuse to charge the sale on a credit card, but when pushed they will back down. I have purchased my last 4 cars all on credit cards. To say the least the dealer was not happy, but when presented with both a copy of the merchant agreement, and my declaration to pursue with the credit card company, they quickly reversed their position. My calculation is that between the rewards (cash back) and the zero percent rates on the credit cards, my savings were well in excess of $6,000.
Visa confirms that dealers don’t have a choice:
U.S. merchants must follow basic card acceptance rules for all Visa transactions. Visa’s rules do not allow merchants to impose a maximum transaction amount as a condition for honoring a Visa card. Our rules require merchants to always honor valid Visa cards regardless of purchase amount — large or small.
There are plenty of reasons not to pay with credit, though the thought of charging back a lemon is tempting. Would you ever put a car on your card?
Savvy shoppers may get car with card [Bankrate]
(Photo: Peter Kaminski)
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I have put a large d/p on a car with a credit card. The total owed was around $7k; first the salesman said we had to write a check for the rest because “the machine doesn’t let us put through more than two thousand.” Uh-huh… So we told him that was fine, just run separate transactions for under $2K. We had to really make it clear that any other solution was unacceptable, and would cause us to become a huge pain in the collective ass of the dealership and all involved. Then they acted like they were doing us a favor–oh, please!
I’m guessing that most people assume that means they can’t pay a total of over $2k and give in, and that’s how dealers con people into charging less. Dirty!
Of course there’s also the incentive to sell financing; credit card=lost commission.
@Fist-o: No, they don’t. I guess I should have been more clear.
They had to jump through some hoops to get it done, but they were able to get the CC company to raise their limit for the one purchase. I’m confident that the limit was reduced shortly after the purchase was made but they were able to get the miles.
If they hate credit cards so much, why do they accept them as payment in the first place?
@TeraGram:
Charge car with card “A”. Pay off card “A” with convenience check from card “B”.
This should also double manufacturer’s warranty for free. Anyon know if that applies here?
Paid for my current car with AMEX Gold. Pissed the dealer off to no end. I negotiated the cash price then told them to ut it on the card. The salesman’s look was priceless. He came back after about 20 minutes and tried to fight it, then the sales manager came and told me that they could not sell me the car at that price if I intended to pay with AMEX. I told them I wasn’t paying anything more than the price we agreed on and I asked for the general manager to tell me personally that they were not going to sell me this car. Five minutes later, he came back and said that they were running the card. I had to sign a few extra pieces of documentation, they needed copies of the card, etc.
And since I had the cash in the bank, I went home and paid it off that night. About to take a half a vacation with the points.
I have never been so pissed off in my life until I was treated like trash yesterday paying for my new Acura MDX in cash. Once the finance manager found out that they weren’t going to make any financing or leasing money off of me, he walked away for 45 minutes until finally coming back. Had there been another Acura dealer within an hour of me I would have walked out and bought it there.
Car dealers are slimy enough and by now have figured out the Visa limitations. There is a simple why to avoid accepting Visa and it is called the SALES CONTRACT. You know, that written document that you signed agreeing to the price. Somewhere on the sales contract (in ultra fine mouse print no doubt) is the terms of the sales that stipulates the methods of payments that can and will be accepted per the terms of the contract, specifically the transaction is considered a cash transaction or a financed transaction with payment due to the dealer within specified period of time (in other words your Credit Union must pay by check within the days specified). Cash transactions include a discount for paying in cash, which was factored into the selling price agreed upon in the contract. A Visa transaction would violate the terms of the contract as Visa payments are considered a delayed payment AND involve an additional discount from the selling price with regards to the funds received by the dealership. Since Visa allows cash transactions to have a cash discount, the dealership is allowed, per VISA rules, to a have a different (read higher) price for non-cash transactions. A sharp dealership (read slimmy) is going to have their butt covered and will charge appropriately for handling the Visa transaction.
I put $3000 of my last (used) car purchase on my credit card, on which I’m getting 1% back. They wouldn’t let me put any more on. Too bad I didn’t know about this. That having been said, I suppose they could have just refused to sell me the car at all, and I didn’t want to go there.
So wait. Visa says they can’t refuse a transaction, large or small? Does this mean those places that say they won’t accept credit cards for less than $5 or $10 are breaking the rules of Visa’s merchant agreement?
Does anyone have a “pocket” version of the merchant agreement? It seems like more and more that consumers need to be armed with it to educate merchants.
@aishel: I, too, heard from stories that dealers have a $2k or $5k limit, which I guess is equivalent to the $20 minimum, only on the upper end. Never thought about charging my card anyway, since my credit report will show that I maxed out my credit card on, say May 2006, which might or might not affect your credit score since you might decide to max out all your credit cards.
A new idea just came to me: what if you negotiated a good price, financed the car at 0% with no pre-payment penalty, then pay off the entire amount with your credit card when you receive your first billing statement? I can’t remember if they’ll let you pay more than one month’s worth of payments or if the your particular automakers’ finance service will accept credit cards as payment without incurring a fee (flat or percentage), but if they did, this might be a way to go around the “salesman said they won’t do it” situation.
@Corporate-Shill: if this is true, then everything, including the article, is moot.
Here’s an idea:
You choose to buy your auto at a particular dealer, then decide to use your CC. Dealer balks.
Oh well, you tell the dealer, you aren’t the only game in town.
You ALWAYS have to be willing to walk, at any time. ESPECIALLY at this point in recent history, where dealers are clamoring for ANY business.
Consumers always have the power- if you don’t like the terms, take your business elsewhere, whether it’s an automobile or dishwasher or pair of shoes or pack of gum.
@linus:
That merchant agreement found on the Visa website is absolutely worthless. It is essentially nothing more than guidelines.
The real merchant agreement is a contract between the merchant and the merchant bank. THOSE rules are much more complex. For example, a merchant bank can refuse to permit a business to engage in any internet sales. For many years that was a common merchant bank rule and still is found with some merchant banks. Bottom line the merchant bank is free to set their own rules and it is up to the merchant bank to regulate their rules.
Want some proof?
Everybody hates on Bank of America. Their website
[www.bankofamerica.com]
Allows photo ID to viewed if the transaction is suspicious.
“Verify signature
Always verify that the signature on the back of the card is reasonably similar to the signature on the sales draft and that the spelling is identical. If suspicious, ask for an ID and verify the signature on the ID to the signature on the credit card.”
Pretty simple, a merchant could state that all transactions are suspicious and therefore require photo ID on all transactions… and the merchant would be in full complaince with Bank of America rules.
MY merchant bank “requires” me to video tape all customer over the counter transactions OR have a manditory check photo ID policy. I chose the video tape policy to comply with the Merchant Bank rules. Since I have the video taping policy, I qualify for a lower rate than other merchants. See, it is in my best interest to comply with the Merchant Bank.
@MollySavoie: “If you purchase a car by credit card you don’t own the car, the credit card company does.”
This is false. Car loans are secured loans; your repayment of the loans is guaranteed by a lien on the item purchased. Credit cards are unsecured; there is no lien placed on anything. It has to do with the type of credit, and nothing at all to do with the item being purchased.
As such, it’s worth pointing out that doing this doesn’t necessarily preclude financing your car. If you’re buying with a credit card, you’ll get clear title to the car; you can then refinance the car through an auto lender, and use the money you get from that loan to pay off the credit card. (Most auto lenders consider a car within the first few months after purchase to be “new” for loan purposes, so that you can refinance easily.)
@MollySavoie: “Now the customer whips out their credit card, which may make this measely 1% profit margin either disappear entirely, or even make the dealer move a unit at a loss. While this may excite some consumers at the prospect of “sticking it to the man”, there are lots of hidden repercussions of creating such losses.”
there’s no law that requires a business to accept credit cards at all – if it’s such a detriment to car dealership to let customers pay via that method, then they shouldn’t accept them. Why is it the consumer’s responsibility to watch the dealership’s back by considering how a credit card payment may adversely affect the dealership. And as far as sticking it to the man goes – there are many reasons why that might make people feel good when working to buy a car – it’s not an industry well known for stand up, honest customer service. Do you work in auto sales by chance?
Putting a car on a credit card is, in my view, a good option, especially if you have a 0% card. And hey, if you can’t pay the card, you still have the title to the vehicle without any liens, good luck trying to get the card back, it’s already paid for as far as the dealership is concerned.
trying to get the car* back
Your typo just brought up another interesting situation, one in which the salesman LITERALLY ran away with your credit card LOL
@walterm08
Don’t know about Accura, but I’ve had better experiences dealing with the internet sales person or the fleet manager (usually the same person). Find one online you like, take it for a test drive, and they’ll generally take any form of payment. They’re used to dealing with businesses and municipalities that pay in cash via purchase orders and corporate fleet management companies. I’ve bought 2 cars this way – spent less than an hour in the dealership each time, mostly on the test drive.
Depending on who you deal with, using a CC will not be a problem. Last year I bought a new $15,000 Kubota Zero turn lawnmower with my AMEX. I was even asked if I wanted to use my CC or write a check, so I went for the rewards points. I paid the amount when the AMEX bill came in later that month. No Problem.
My wife recently had a full mouth of teeth implants. Total cost was $80,000. I put the entire thing on my Amex card. They didn’t balk. Of course, I’m sure the margin is much higher on high-end dental procedures.
I just recently purchased a new $16k Honda Fit. I put the $500 down payment on my Amex but they wouldn’t allow the full car on it, so I just wrote a check. A real PITA since I had to move the money into that account and then wait until it was available for withdrawal.
Anyway, if you have a good history with Amex they’ll let you charge outrageous amounts — just gotta pay it off when the bill comes in.
My wife & I were caught in a vehicular pinch five years ago and bought a used van from a dealer so that we could use the credit card option. They weren’t happy about us using the card, but went ahead with it when we threatened to walk. A week or so later we took out a standard loan through our credit union (at a much lower rate than the dealer had to offer) and paid off the CC when the statement came. Got a good number of points off that one, but that account had a pretty lame points program.
With our present VISA card (through Countrywide), we get a $50 credit toward our home mortgage for every $2,500 we spend on the card, plus there is no interest or fees on the account. We’re in the market for another car (used), but I hate the idea of going to a dealership again.
I would think the card merchant fees on a NEW vehicle probably would put the dealer at a loss given the razor thin profit margin on new vehicles. HOWEVER, used cars have an insanely high profit margin. Take the price of a used car and divide by 2 and you’ll be within +/-20% of what the dealer gave for it in trade or at auction, the dealer’s cost on that used car might even be less if it was a repo bought at auction.
There’s a good reason every auto dealer you go to generally has just as many if not more used cars on the lot than new.
My fiancee put her car on a cash rewards card. She had enough money available that she was able to put the car on the card, then pay off the balance in full when the bill came due. Purchases like cars are very nice when you have cash rewards and don’t accrue interest on your card!
I sold cars for a few years. We would take credit cards for vehicles up to any amount, but the merchant fee was added to the price of the vehicle (it has been awhile but it seems it was 1.5%). The only exception was the GM card since the dealership was reimbursed the merchant fee.
I have purchased our last three vehicles using our GM card (the only thing I use it for actually hehe). Some people would get upset, they were buying a car cheap, into the holdback money after 3 hours of arguing over the price. Then would whip out the credit card to be told it would add $500 or 600 bucks to the price.
Most people did not flinch though, the rebate points etc would cover the charge and most of them had 0% for XX months and what not.
If a dealer is flinching at taking a card, use a courtesy check. It usually works out better. Call your credit card company, tell them you are making a major purchase and see what deal they will make you. They will usually send you 2 or 3 blank checks with different terms (4.9 fixed forever, 2.9 for 36 months, or 0% for 24 months or similar).
Going that route you can right the check for more then the purchase price and have the dealer give you the difference back for TT&L.
@MollySavoie:
When I make a purchase on my credit card it is “unsecured” debt. The credit card company is making me a “personal” loan and I typically pay a higher interest rate as a result.
You don’t have a clue what you are talking about, better to keep your trap shut than to make an ass of yourself.
Screw this. Big fat waste of time.
I’m going to save cash, and buy a good used car from some private person. (Hopefully an old lady).
You all can keep your 2% rewards…
As far as my kid’s college goes, isn’t that what 529′s are for? to save taxes on college?
I could try this, but as happens with any transaction of more than 30 bucks or so*, Chase would decline the attempted purchase, then have a computer call me the next day asking if I still wanted to make the buy….
*Okay, slight exaggeration for attempted comedic effect. Chase usually trusts me on purchases of less than a hundred as long as they’re made within 250 yards of my billing address.
@BeerFox: Generally points dont accrue on convenience checks. Otherwise, I would pay my mortgage with them and would have paid for 100K of grad school with them as well.
Beware of any artificial maximums on your rewards cards if you try this plan. My parents charged two year’s of school tuition to a credit card in one transaction (a year for me and one for my brother). They were attempting to cash in on double airline miles, but they only received 15% of what they expected. Apparently the card has a hidden cap on bonuses. Check with your card company before you try this, or you’ll be stuck with a higher-interest payment plan and nothing to show for it.
@zarex42: Well, if the dealer doesn’t like the agreement, they don’t have to sign it. And the fees they pay are negotiable if they have the business to back it up. It’s pretty much the same for them that it is for the people buying the cars – if the deal doesn’t suit them, they can pass on it.
Here’s what I did to purchase a $26,000 used car on a credit card in an
indirect way: I had the cash to buy the car outright, but I wanted to keep
earning a little interest on that $26,000 which, at the time, was in a 5%
APR money market account (Countrywide.com). I called up Discovercard from
one of the many 0% balance transfer offers I had been receiving at the time
and asked if I could transfer $26,000 to my home mortgage line of credit,
which I have but have never really used. They allowed this – just wouldn’t
allow a transfer directly to the Countrywide account or any other checking
account.
So, I paid for the car with a check drawn on my money market account,
initiated a transfer of $26,000 from my line of credit to refund my money
market account, and finally had Discover do a 0%, no fee balance transfer to
refund my line of credit. I paid no interest or fees on any of this and in
the almost two years since, I’ve been earning between 4-5.5% on the $26,000.
I have had to pay a minimum payment of about $380/month to Discovercard, and
after the first 11 months or so, I had to make $25 purchases each month on
the card in order to keep the 0% balance transfer interest, but the interest
I’ve been charged on those purchases has been tiny compared to the interest
I’ve earned on the original balance transfer. I actually just paid off the
card in full as I’m going to be buying a new house in the next few months,
but I’ve earned at least $1500 in interest since I purchased the car.
It seems like the smartest thing for dealers to do would be to simply introduce a credit-card pricing plan. The computer company I work for does this for all transactions. We offer a cash-discounted price for payments via wire transfer or direct cash deposit because we don’t have to pay the 3% merchant fee.
Someone earlier mentioned making sure you negotiate the price first, which is underhanded, but a dealer could simply state that they charge 3-3.5% more for any purchase made with a credit card (3.5 obviously being for American Express). This way, you know going in that you CAN pay with a credit card, and the dealer doesn’t lose anything on the deal in merchant fees.
@TeraGram:
Not to mention many of them are subject to cash advance APRs, which are usually quite a bit higher than purchase APRs.
@Scuba Steve: Funny you say that! Fields BMW in Orlando tried that crap on me…they told me the machine can’t read the mag. stripe, and they can’t key in a number for a large purchase (in their defense, keyed in transactions are usually an extra 1% in fees)…. No problem, I asked them what the error code was (I used to work for Verifone, a maker of CC readers).
The moron stared and said “It says it was probably from leaving your card on a security deactivator at a store like Wal-Mart”
Me: “Hmm..what was the error code?”
Him: “That’s just what it says on the display”
Me: (Realizing that he’s full of shit…) “Mind if I take a look?”
Him: “We don’t allow customers to see our financial processing equipment for privacy reasons”
Me: “So..for privacy reasons, when I buy a new wiper blade, the clerk disappears with my credit card?”
Him: “Look, we’re giving you a great deal as it is”
(we go back and forth on the the fact that he’s changing his reason for not using the CC..etc..)
Finally, I did what I should have done to start with and walked out. 2 days later, I get a call begging for me to come back in….told them to either knock another 1% off the price or to pound sand. I ended up saving an extra 1%, and used the rewards miles to upgrade to J on the flight to Europe (BMW knocks off 5-7% from the price if you do European delivery)!
So basically, they make it a huge PITA so that 99.9% of customers are discouraged from using a CC.
@Ragman:
Discover basically says if you don’t charge users of the other CCs that you take for using their card, you can’t charge our clients…so if the place takes Visa/Mastercard, the same rules apply.
@MollySavoie:
WTF are you talking about? By your logic…if I buy a toaster at Sears, Discover can dictate what types of bread I put in the thing until the 14th of each month, when I pay the bill off…
@BeerFox:
BE CAREFUL! those “convenience cheques” are usually treated as cash advances and you pay a ridiculous rate on those!