I'm thinking about using a 0% interest, 3% fee 'convenience check' on my credit card for half the cost of a used car. This is for short term pay-off within 3 to 6 months. A quick look at used car loans shows me some at about the same rate, but a car loan seems a lot more complicated with requirements and likely a lien.
Does that make sense?
Are you 100% certain that you can pay off the card in the 3-6 time frame no matter what?
Theoretically this can work for a short term loan, but as a bunch of people found out in 2008, E36 M3 tends to hit the fan when you can't pay the money back under all circumstances before the 0% period is over (or roll it over).
My old man used to buy cars with credit cards using 18 month 0% interest offerings. If it went beyond 18 months, it would get transfered to another card with an additional 18 months. There usually was a transfer fee of ~3%, but worked out cheaper overall than a car loan. Plus you can get points or cash back depending on card.
YMMV - but it is a legit option you are looking at.
The car loan at 3% will be cheaper than the credit card at 3%.
For example, if you're buying a car for $10k, you're paying a $300 transfer fee if you use the credit card. You're paying 3% on the full amount.
If you get a car loan at 3%, for 6 months, you're paying $88 in interest, because you're paying down the loan. If you get a loan at 3% for 36 months (3 years), you'll be paying about (EDITED) $469 in interest.
12 months @ 3% is about $163, 18 months is $239, 24 months is $315.
This is assuming that you don't have to pay for gap insurance, insurance is the same for a financed vehicle vs. one owned outright, and no early payoff penalty.
Long story short, it probably makes more sense to get a conventional car loan (try penfed) rather than risk the high interest of the credit card. Do the math yourself though, different situations make different outcomes.
former520 said:My old man used to buy cars with credit cards using 18 month 0% interest offerings. If it went beyond 18 months, it would get transfered to another card with an additional 18 months. There usually was a transfer fee of ~3%, but worked out cheaper overall than a car loan. Plus you can get points or cash back depending on card.
YMMV - but it is a legit option you are looking at.
This will not work with what AAZCD is proposing. You don't get points on the balance transfers. It would only work if you buy from a dealer that lets you swipe a car.
In reply to mtn :
Good points about the interest and reward points. I'm going to get a look at the details of the car loans to see if the other factors add up enough to make a difference. If its a matter of hundreds of dollars, the loan is worth it. It's the kind of thing that I could just about stretch to do with cash, but right now that seems like a worse idea than using credit. Best to keep some cash around these days.
In reply to AAZCD :
Might be helpful. Inside this link you will find details of my transaction borrowing money on a car I already fully owned.
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