How to buy a car using your frequent flyer credit card

By Chris Chamberlin, October 5 2016

Credit cards are a great way to earn frequent flyer points every day, but using one to buy your next car could be a boon for your points balance.

That’s because credit cards award points based on how many dollars you’ve spent – so charging a high-value purchase like a shiny set of wheels is an easy way to increase that expenditure from a payment you’d have otherwise been making anyway.

But it can come at a cost in the form of credit card surcharges. Australian Business Traveller looks at the strategy behind paying for your car with plastic and crunches the numbers to show why it can be worth the fuss.

Buying a car with your credit card: the basics

First things first: most car dealers have credit card facilities nowadays, but many won’t advertise that fact unless you ask – and even then, some will only allow a small deposit using your card with the balance expected by electronic transfer or bank cheque.

For example, one dealership visited by Australian Business Traveller allowed customers to pay up to $2,000 by credit card with no surcharge (including by American Express and Diners Club), but insisted on other payment methods for the balance of the purchase.

Instead of taking ‘no’ for an answer, that’s your chance to negotiate – such as by offering to cover the costs of processing your card transaction by paying a surcharge, so that the dealer winds up with the same amount of money in their account as though you’d transferred cold hard cash.

Whip out your AMEX card to earn points, but offer to cover the dealer's costs...
Whip out your AMEX card to earn points, but offer to cover the dealer's costs...

As a guide, most businesses pay between 0.5% and 1.5% to process Visa and MasterCard payments and between 1.5% and 3.5% to process American Express and Diners Club cards, with average rates falling between the two extremes.

Does paying that surcharge make sense?

Let’s assume you’re splashing out on a $75,000 car and that you have an American Express card which earns 1.5 Qantas Points per dollar spent, uncapped.

A 2% surcharge on that amount would be $1,500 while a 3% surcharge comes up as $2,250: the latter taking your total payment to $77,250.

That’s an expensive surcharge, but it can prove worthy of the investment.

At the higher 3% rate, you’d pocket a whopping 115,875 Qantas Points at a ‘cost’ of $2,250, so in other words, you're buying points by paying that surcharge.

That’s enough for a first class upgrade from Australia to London via Dubai (60,000 points), and a first class upgrade from Sydney to Dallas (50,000 points) and also a business class upgrade on short flights like Sydney-Melbourne from a flexible ticket (5,000 points), with 875 points to spare.

Why fly in business class on your next trip when you could stretch out in First?
Why fly in business class on your next trip when you could stretch out in First?

If you can convince the dealer to pay the first chunk surcharge-free as they might usually allow on deposit payments, then even better.

What to look out for when using your credit card

For some, the biggest hurdle here will be their credit limit – in which case you could split your purchase across several different cards or you could consider over-paying your credit card to temporarily increase how much you can spend.

You’ll want to contact your card issuer for advice before doing this as not every bank allows it: and even if you have a ‘no limit’ charge card such as an American Express Platinum or Centurion, it’s still a great idea to give warning of any unusually large purchases.

Also note that some providers like Citibank award no points at all on transactions greater in value than your usual set credit limit or where the card is $10,000 or more in ‘credit’ (after an over-payment): so again, talk to your bank before approaching a car dealer.

We know you’re smart and you’ll pay your credit card off in full to avoid those high interest charges, but also be mindful of any points capping rules that may apply, even on Platinum cards.

For example, NAB’s top-tier Qantas Rewards Premium AMEX awards points only on spends of up to $25,000 per monthly statement period, while the similar NAB Velocity Rewards Premium AMEX caps that at a lower $20,000 per statement window.

But if you have the perfect combo – a card with no points capping, a high credit limit (or a flexible bank) and a dealer willing to play ball – buying your next car could take you around the world, not just down the road.

Also read: Five strategies to maximise your credit card points

Follow Australian Business Traveller on Twitter: we're @AusBT

Chris Chamberlin

Chris Chamberlin is the Associate Editor of Executive Traveller and lives by the motto that a journey of a thousand miles begins with a single step, a great latte, a theatre ticket and a glass of wine!

fxdxdy

fxdxdy

Qantas - Qantas Frequent Flyer

18 May 2011

Total posts 219

I've been wondering about this for a while and now you've answered my question!

Another question though - what car are you looking at getting? :)

JTG

JTG

Singapore Airlines - The PPS Club

11 Jul 2014

Total posts 40

I bought an SUV last week on my AMEX credit card. Most dealers would offer no surcharge on the first $3,000 of the purchase and then the remaining value varied from 1-3.5%. I paid 1% and am very happy with my haul of points

jubbing

jubbing

American Airlines - AAdvantage

13 Jul 2015

Total posts 217

How many points per $? Was it just the 1 or more?

JTG

JTG

Singapore Airlines - The PPS Club

11 Jul 2014

Total posts 40

Only one point per $ but no monthly capping limits

fxdxdy

fxdxdy

Qantas - Qantas Frequent Flyer

18 May 2011

Total posts 219

Are you comfortable revealing what the dealership is because I am interested in doing what you did.
But only tell us if you are comfortable, I don't want to invade anyone's privacy.

JTG

JTG

Singapore Airlines - The PPS Club

11 Jul 2014

Total posts 40

I bought a Hyundai Tucson from the Suttons Roseberry dealership

vperez

vperez

Qantas - Qantas Frequent Flyer

26 Sep 2014

Total posts 49

I did much the same back in April charging $13k on my Altitude Black to pay the balance on car after selling it so I could travel. 

UpUpAndAway

UpUpAndAway

QF

11 Jul 2014

Total posts 294

18 months ago I built a house and pool, paid via credit card after that Virgin money changed the rules to a limit of 10,000 points per month.

jubbing

jubbing

American Airlines - AAdvantage

13 Jul 2015

Total posts 217

I think the next question is, up to purchases of say $100k (whether it's $10k or $70k) - which card gives you the maximum points return on car purchases in terms of points?

Chris Chamberlin

Chris Chamberlin

24 Apr 2012

Total posts 2948

Hi Jubbing, as far as we're aware (but we're happy to be proven wrong if so!), no credit cards in Australia award bonus points at car dealerships, so you'd instead want to look at the 'everyday' earning rate of your card and any monthly/yearly points caps.

Some of the highest earners which you might like to take a look at (but these are merely suggestions, not necessarily recommendations):

  • Diners Club personal charge card (2 Velocity points per dollar via conversion, uncapped, provided your dealer accepts it)
  • AMEX Business Accelerator card (You'd need an ABN, but earn the equivalent of 2 Velocity points/KrisFlyer miles/Etihad miles etc. per dollar on most purchases up to 100,000 points a year, then earn halves to 1 point per $1 thereafter)
  • ANZ Rewards Black (for Velocity) or ANZ Frequent Flyer Black (for Qantas): earn 1.5/$1 via the AMEX with no capping. Similar deal also from Westpac Altitude Black (Qantas, Velocity and Malaysia Airlines), and on the new AMEX Explorer card (Velocity, SQ, CX etc).
  • Citi Prestige Visa (earn the equivalent of 1 Velocity/SQ etc. point per $1 via Citibank Rewards, or opt-in for Qantas Points to earn 1/$1 direct into your account, uncapped, but note our caveat above about over-payment and points)

jubbing

jubbing

American Airlines - AAdvantage

13 Jul 2015

Total posts 217

That was more thorough an answer than I was expecting - cheers Chris!

sgb

sgb

Emirates Airlines - Skywards

30 Nov 2015

Total posts 745

Mercedes would only allow a 5K deposit on credit card, I tried for more.

Rigs

Rigs

Virgin Australia - Velocity Rewards

13 Dec 2015

Total posts 30

I used it for a 5k deposit. Aside from that the dealership was a bit inflexible.

NM

NM

04 Sep 2015

Total posts 2

 2 years ago, I did a part payment of $15,000 on my Amex for a car purchase. Pretty sure they didn't charge a fee either (or they forgot). They would have taken more also, but didnt want to push the charge card too far.

grov

grov

QFF

19 Sep 2013

Total posts 151

Same as NM - spent about 15k on my Amex as part purchase for a car. Didn't worry about the surcharge as it was less than the 3-5c/point that I value my FF points at. Now reaping the benefits with a RTW J award flight next year. My partner built a house on Amex and also scored a CIrcle Pacific inJ out of it.

MR1961

MR1961

17 Feb 2016

Total posts 24

I used my Westpac KrisFlyer American Express card to buy my Mercedes C200K. I let the bank know in advance and also put half the value of the cost of the vehicle on my card to show as credit up front, with the balance paid on the statement due date. I did pay credit card fees, but at the time I earned 3 x points per dollar on the spend - on $79k, I earned just under 240,000 points and enough to fly my partner and I business class to Europe return. 

anna100

anna100

23 Jul 2012

Total posts 21

My new car was only about $24K.  But, I rang various dealers and said that I'm only buying, and across 3 cards.  I told the local guy I was prepared to drive to another dealer but I'd prefer to buy local, and he allowed that at no surcharge at all.

cricketragic

cricketragic

Qantas - Qantas Frequent Flyer

14 May 2014

Total posts 4

I bought an E  Class Benz a few years back and they were prepared to accept my credit card but wanted to charge 4%

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