The last five cars I’ve owned have all been purchased by cashier’s checks. I loathe going into debt on an asset that is guaranteed to depreciate. In fact, I dislike buying anything that is guaranteed to depreciate!
I stopped by the BMW dealer on the way home from golf one day and checked out their new 650i coupe series. If someone could figure out a way to bottle that wonderful new car smell, they’d make millions off fanatics like me!
Given this particular 650i coupe was priced at $104,000, I decided to check out the more moderately priced 2016 X3, 2.8 litre engine SUV for $48,000. Same new car smell for half the price. Score!
Out of curiosity, I asked the saleswoman whether I can put the car on my credit card which has a $50,000 limit. She said, “Nope!” The most I can charge on the card is $3,000 What the heck is the point of carrying a credit card if I can’t charge a BMW on it? Gee whiz!
In actuality, the $3,000 limit is a good thing since I’d be tempted to buy a new car every single year! I asked her why the $3,000 limit? And she responded, “Fees, those darn fees.” Credit cards charge 1-2% fees on average for every single purchase. 2% on $50,000 is $1,000 out the door. Hey, kinda like PayPal fees, but not as bad!
I then told the saleswoman, “What if I just buy the car for 1% more than asking price, then can I use a credit card?” She thought about it for a moment and still declined. Of course I would prefer not to pay more than I have to for anything. I just thought this would be an interesting solution.
“Our policy, no matter what your credit limit is, is still $3,000 maximum. The reason is we don’t want people charging their downpayment, which then defeats the purpose of a downpayment. We don’t want a situation where a buyer purchases a car on credit, totals the car, and can’t pay either the payment or the costs necessary to fix the car! A buyer needs to have skin in the game, that’s our bank’s policy.” explained the saleswoman.
Wait, so she’s saying I can’t borrow money to pay for a down payment to borrow more money? What the hell kind of dealership / country is this anyway? I thought we can do what the government and millions of Americans do everyday and take from one, spend it on ourselves, and never have to pay it back!
The $3,000 credit card limit policy is ubiquitous. I called Mercedes, Audi, and Range Rover, and they all said the most someone can charge to purchase a car is $3,000. The rest must be financed by their own bank or paid in cash.
I was really looking forward to charging $50,000 for the X3 and getting enough rebate points for a round-trip ticket to Europe. Alas, I will settle for good old Rhino, my inexpensive Honda Fit, keep the $50,000 and have the optionality of buying 100 round-trip tickets to Hawaii instead.
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Updated for 2021 and beyond.