An Introduction to Auto Credit Cards
Looking for ways to cut down your auto-related expenses? Using an auto credit card may be one way to do it. In recent years, many of the major auto manufactures have teamed up with credit card companies to introduce co-branded credit cards. When you use one of these auto credit cards, you can earn rewards toward the purchase or lease of a vehicle or other automotive products.
What’s in it for you?
Each auto credit card is a little bit different and the reward programs of each also differ from each other. With some cards, you earn rewards points towards a new vehicle from a particular manufacturer. Other auto credit cards let you use your rewards points with any manufacturer. If you haven’t yet decided which manufacture to buy from, this type of card will give you the flexibility to shop around. There are also auto credit cards that don’t offer rewards points towards vehicle purchases, but instead let you put those rewards towards the cost of car parts, services or even accessories.
Since auto credit cards have gained so much popularity with consumers, almost every major manufacture now offers one type or another. Whether you’re looking for an affordable family car from GM or Volkswagen or a luxury model from BMW or Audi, there’s a card for you. If you’re hoping to find an auto credit card that will help you save up for that Mercedes you’ve had your eye on, though, you may want to consider another manufacturer. To enhance the feeling of exclusivity attached to driving one of their cars, Mercedes limits enrollment in their auto credit card program to people who already own a Mercedes.
Beware of the fine print
Before you sign up for an auto credit card, keep in mind that there aren’t currently any cards that will let you cover the whole cost of a vehicle with rewards points alone. The rewards points will usually get you a discount of between $1000 and $5000.
It’s also important to realize that if you have an auto credit card that gives you rewards for the purchase of a new car from a certain manufacture, that may be the only thing those points are good for. If you decide to buy from another manufacture, your reward points may be useless because they usually can’t be transferred or converted into cash.
Your rewards may not apply to every car the manufacturer makes, either. In many cases, the rewards points can only be put towards certain models the manufacture has chosen to be eligible for their auto credit card discount program. The amount of the discount can also vary from model to model. You’ll probably be able to get a greater discount on a less popular model than you will on a model that’s selling well.
Another thing to consider is that typically rewards points can’t be put towards the purchase of a used car. Although some auto credit cards will let you use your rewards points for a used car, usually only new cars are eligible.
If you’re using an auto credit card as a way to save up for a new car, make sure you’ll be able to buy that car within the next few years. Most auto credit cards limit how long the rewards points are valid for to four or five years. If you aren’t ready to buy before the time limit, those hard-won rewards will disappear.
As with any credit card, auto credit cards can have annual fees and, of course, interest rates. In fact, many auto credit cards have interest rates that are higher than standard credit cards. Check into these rates carefully before you decide which card to sign up for. After all, if you pick a card with a high interest rate, you could end up spending more on interest than you save on auto expenses.
Shop around for the best deal
If you’re considering enrolling an auto credit card program, shop around before you commit to anything. Before you start comparing one auto credit card to another, make sure you know exactly what you want to get out of the program, so you can get the card that’s best for you personally. Make sure you understand how the reward system works, the limits on rewards earnings and redemption maximums, and the yearly fees and interest rates so you don’t get any nasty surprises after you’ve started using the card.
Choose your auto credit card carefully and you may able to save up to $5000 on your next new car. Even if you’re not planning to buy a car in the near future, using an auto credit card wisely can still significantly reduce the amount you spend on keeping up your current car.