Can You Buy a Car With a Debit Card?

Article Summary:

If you plan to buy a car, you might wonder if you can buy it with a debit card. After all, paying with cash has the advantage of avoiding the interest you would accrue when financing. Paying in cash can also be a good option if you have bad credit. But if you want to buy a car with cash, it turns out that your options are somewhat limited.

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Whether you are trading in an old vehicle or simply buying a new one outright, you may want to pay with a debit card. Doing so can be a convenient way to avoid interest charges when financing. At the same time, unless you are playing a part in a movie, you aren’t going to bring a briefcase full of dollar bills to the dealer. This article will cover the question of whether you can buy a car with a debit card. We’ll also go over what you need to know when paying with a debit card.

Do dealers accept debit cards as payment?

Would you like to buy a used or new car with a debit card? Here’s what you need to know: most car dealerships won’t accept debit cards as payment.

Whether you want to use a bank card or a prepaid debit card, the same principle applies. For car dealers, there are fees that come with debit card payments that are often too steep to justify.

If the dealer were to swipe your debit card, they would be subject to swipe fees of three to four percent. Depending on the sale price, that could mean several hundred dollars in fees. The net profit margin on new car sales can be as low as one percent, so the dealer could actually lose money on the sale if they accept debit cards.

You may have heard that dealers make most of their money from service and repairs, and there is a lot of truth to this idea. Dealerships often take a loss on a deal for many reasons, including clearing inventory. Indeed, where dealers make most of their money is dealer financing, warranties, and repairs.

Plus, debit card payments can carry added risks. Dealers tend to be leery of paying this way because of the chance of debit or credit card fraud. For example, you could dispute the sale after the fact, citing any number of issues with the car.

Even if your concern is legitimate, a successful dispute could again lead to the dealer losing money on the ordeal. This all adds up to yet another reason most dealerships won’t accept debit cards as payment.

Things to know if you pay with a debit card

Did the dealership give you the go-ahead to buy your vehicle with a debit card? If so, here’s what you need to know.

Daily spending limit

Your card might have a daily spending limit, meaning the debit card transaction might be declined if you try to spend above that limit. Of course, when purchasing a car, there is a high chance of exceeding that limit. Most banks have a limit of $2,000 to $7,000 per day.

However, it might be possible to increase the limit. Banks set these limits to prevent theft if your card is stolen. Thus, they will likely increase the limit if you call in advance and let them know about your upcoming car purchase.

Be sure you have enough cash

It might seem like a no-brainer, but you need enough cash in your account when paying cash for your new car. And remember that the sticker price isn’t the only thing you have to pay for when making car purchases. There are also registration fees and taxes to cover. That means the exact amount you pay might be higher than you initially expect.

What if you can’t use a debit card?

While some people prefer to pay cash when buying cars, debit cards aren’t always an option. When making such a large purchase, you might have to consider other options. Here are some alternative ways you can pay instead.

Pay with a bank account

If the car dealer doesn’t accept your debit card, you can pay with a bank account instead. You can do this by arranging a bank transfer from your bank or credit union. These transactions usually take two to three business days.

Use a cashier’s check

Another option is to get a cashier’s check from your bank to pay for the car. The dealer knows these checks won’t bounce; plus, you avoid the possibility of having a hold on your account. That could happen if you pay with a personal check.

Use a money order

A money order is an alternative to a cashier’s check, but you can pick one up at many places, like Western Union or a grocery store. Money orders can be made out to cover the exact cost of the vehicle, then bring it to the dealership.

Pay via wire transfer

If you are buying at a dealer, one option is to pay via wire transfer. Keep in mind that there are usually fees to wire money; expect to pay between $15 and $30 for domestic wire transfers. This option is best for dealer purchases as private sellers may not be willing to give you their information for a wire.

Bottom Line

The car buying experience can be a stressful one, and you probably just want to simplify things as much as possible. You may hope to make the full payment on your debit card and just be done with it.

Unfortunately, not all dealers will accept a debit card from the buyer. Whether you are paying cash for a down payment or the entire cost of the car, there are alternatives to using a debit card.

For example, a bank transfer, prepaid card, or wire transfer could be possible ways to cover the cost of your new car. Just be sure to contact your bank and let them know about the upcoming purchase and that you have enough cash in your bank account. All of these steps will help ensure there are no issues when you are at the dealer and help the process go as smoothly as possible.

Key takeaways

  • While some dealers will accept debit cards, not all of them will.
  • Debit cards add high fees and financial risk for dealers.
  • If you do pay with a debit card, be sure you have enough cash on hand, and the transaction won’t hit your daily spending limit.
  • Don’t forget about extra expenses, such as taxes and registration.
  • If you can’t pay with a debit card, you have other options, including bank transfers, cashier’s checks, money orders, or a wire transfer.
Article Sources
  1. How Do Prepaid Debit Cards Work? – SuperMoney
  2. Can You Buy A Car With a Credit Card? – SuperMoney
  3. How Do Car Dealerships Make Money? (Explained by a Former Car Dealer) – Your Advocate Alliance
  4. How to Increase Debit Card Limit Restrictions – KeyBank
  5. Buying a Car: Paying Cash vs. Auto Loan – SuperMoney
  6. 10 Things You Didn’t Know About Using Debit Cards – SuperMoney
  7. Best Prepaid Cards | September 2021 – SuperMoney