A friend of mine was in the market to purchase his first car recently and asked me to help maximize the amount of points he could get from the purchase. Originally he was going to pay cash, but after talking through the benefits he decided it would make sense to put as much on a credit card (and then immediately pay the card off with his cash) and then finance the rest.
The reason why he decided to take out a relatively small car loan was that since this was his first car purchase, it was a good opportunity to boost his credit score. FICO scores have many different pieces, but generally the more types of credit lines (credit card, mortgage, car loan, etc) you have in good standing, the better your score gets since diversity accounts for 10% of your score.
Secondly, he wanted to maximize the points he got for the purchase for several reasons:
- to hit the minimum spend on the Premier Rewards Gold card
- to get closer to the $30,000 spend threshold, which gets you 15,000 extra bonus Amex points on the Premier Rewards card
- to simply accrue more valuable American Express Membership Rewards points
Throughout the buying process, I discovered that most dealerships have a $5,000 credit card limit, but that number is easily increased with the approval of a manager. However, I didn’t let them know about our credit card plan until the very end, because I figured they’d just factor the cost of the charge into the final price during negotiations.
My friend negotiated the price of the car to a number that he was happy with and then to close the deal that day, his only stipulation was that he wanted to put $20,000 on his credit card. I knew this would be a stretch, but hey - it never hurts to ask.
In the end, the dealership allowed $12,500 to be put on the card, which my friend and I considered a success. You have t0 understand that the dealership really doesn’t want you maximizing your credit card spend, because they have to pay 3%ish in credit card processing fees, plus money put on the credit card means money that can’t be financed through a loan that they are making money off of.
However, in the end car salespeople want to make a sale, so never forget your leverage – walking away from the deal. I am by no means a car buying expert, but thought I’d share the details since it is important to get as creative as possible when finding ways to maximize credit card spend, especially to meet ever growing minimum spend requirements.
I’d also love to hear others’ experiences with car buying/leasing. What’s the most you’ve been able to get a dealership to process on your credit card?
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