Credit cards usually offer cash-back rewards on purchases, so putting a huge purchase on a credit could take a few hundred dollars off the price tag. At the very least, the card offers a grace period, in effect giving the borrower an interest-free short-term loan. Car dealers usually must accept a credit card payment, but they will sometimes refuse to accept one, even in the face of the card's payment network policy.
No government or state regulation would stop a dealer from refusing to put a car purchase on credit, but the payment network probably stops this practice, at least partially. Visa and MasterCard require dealers to accept a credit card payment for any amount as long as the merchant uses their network. Other payment networks, such as American Express, allow car dealers to limit the amount a person may put on a card to a few thousand dollars, according to Terry Jackson of Bankrate.com.
Why Dealers Hate Credit Cards
Each credit card purchase requires the merchant to pay a percentage of the final sale to the payment network, usually between 2 and 3 percent. Car dealers tend to have a lot of competition, so profit margins are thin. The credit card processing fees could cost the dealer several hundred or even thousands of dollars on a high-end sports car. Also, dealers tend to push in-house financing, because banks pay dealers a commission to forward customers to them. Some dealers factor in the cost of the payment method into negotiations, so the interchange fees could be moot for those dealers.
Negotiating a car sale has dozens of factors, such as the need to meet a sales quota and the profit on the car. However, deciding to pay with a credit card could cause the dealer to call the deal off, especially if the sale price comes close to the invoice price, which is the price the dealer pays for the car. If the dealer wins the negotiation and makes a tidy profit, he might begrudgingly accept the processing fees if it completes the deal.
CarBuyingTips.com recommends putting the vehicle deposit on credit, because you can always dispute the charge with the issuer should the deal go awry. You could also push for putting a partial amount of the sale price on credit if the dealer refuses to put it all on the card. When you really want the car sale put on credit, you could threaten to go to the credit card company if the refusal of sale violates the issuer merchant agreement. Additionally, bringing a copy of the cardholder agreement for your preferred network with you when shopping for a car might be enough to force the dealer into accepting a credit card payment.
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