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Ok so we are planning on purchasing a used vehicle for no more then 16k. We have the cash in hand and so it got me thinking.

What options are there to fully take advantage of this situation?

My only thought is if I could I put it all on a 1.5% cashback credit card and then pay that card off in the first month and get a small reward back.
I do not even know if this is an option. If that is the case putting it all on a credit card, travel miles? But if I had to choose between travel miles and cash wins.

Is there any other opportunity I am not thinking of?
Currently we have about twice the amount of the purchase price in an account earning .75% interest.

  • If the dealer/seller accepts credit cards, you can drop it 16k on the credit card if it fits in your limit, and pay it off. – CQM Apr 28 '16 at 17:57
  • If you add a country tag you may get some suggestions specific to your country that may not be available elsewhere – littleadv Apr 28 '16 at 19:45
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    You might save a lot more buying via private seller with cash. A 10% discount beats the pants off of 1.5% cash back and is unambitious. – Pete B. Apr 28 '16 at 20:19
  • @PeteBelford normally I agree about a private seller, however what I have found is the type of vehicle we are looking at is a popular model for leases and so the price difference is small, in some cases lower with a dealership which surprised me. – treeNinja Apr 28 '16 at 20:52
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The amount you are earning in the savings account is insignificant, since you would only have the money in the account for 1 month after purchasing the car. The instant 1.5% cashback (or travel mile reward), on the other hand, can be significant.

However, it is not normal for a car dealership to allow you to put $16k on a credit card. The reason is that the fees that the dealer has to pay to process your credit card would be too burdensome. Car dealers have a much smaller profit margin on their sales than a typical retail store, so if the dealer has to pay 3 or 4% of the sales price in credit card fees, it just eats up too much of their profit.

If the dealer does allow you to put the entire purchase price on a credit card, be aware that they have already factored in their processing fees into the price. You might be able to get a better than 1.5% discount by offering to pay with cash instead.

  • Great point about processing fees. I have heard rumors if you pay with cash, a dealership would lessen the cost. However when i asked two dealerships about this both said no. Do you know if this is a case by case situation? That was my initial thought. – treeNinja Apr 28 '16 at 18:21
  • @treeNinja Dealerships usually have deals with banks where they send customers to get a loan in exchange for a referral fee. If you pay cash, they don't get this fee, so they don't offer a discount for cash instead of for a car loan. However, a credit card transaction would certainly cost them more than a cash transaction. – Ben Miller Apr 28 '16 at 18:40
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    @treeNinja The dealership won't do a deal where they lose money. And if they do allow you to put the entire purchase price on the reward card, you need to realize that, although you'll be getting 1.5% cashback, the dealer's cost of the car has gone up 3 or 4%. – Ben Miller Apr 28 '16 at 18:42
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Seconding @petebelford's comment: if you are looking to save money, considerr taking the middleman out of the equation and buying directly from a car's previous owner. Even after paying a mechanic to inspect it for you, this is likely to be cheaper.

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