This Man Put a $45,000 Car On His Credit Card for the Miles and Made Three Big Mistakes

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This man made a $45,000 2018 Honda Odyssey minivan purchase and put it on his credit card to earn miles but he sure doesn’t seem to have come out ahead in the transaction. There are lessons we can learn for maximizing miles at the lowest cost.

When Chris Mixter, a 39-year-old IT consultant living in Virginia, was ready to buy a car, he decided to try to get a free vacation out of it, too.

His idea: Put the car on a rewards credit card, just to get the rewards points.

He made three mistakes.

  1. He paid with a United co-brand credit card. He also has a Starwood Preferred Guest Credit Card from American Express but says that Amex wouldn’t extend him enough credit to buy the car. Starwood points are worth a lot more than United miles. Why not make a split tender payment?

    And if he was going to use a Chase card a Chase Sapphire Preferred Card‘s points are worth more than United miles (and transfer to United miles and other programs too so you can decide later based on who has award availability or what account needs a top off) and if you have a Sapphire Preferred or Ink Business Preferred Card then spending on Freedom Unlimited could be the better play.

    The United Explorer Card does earn 10,000 bonus points after $25,000 spend in a year — but that’s another argument for at least making a split tender payment (to not go over $25k) rather than putting the whole purchase on that card.

  2. Overpaying for the car so he could pay with a card. He believes the dealership was willing to take a credit card for the full payment because he wasn’t getting any discounts on the car. He was essentially paying for the credit card merchant fees in the purchase price.

    The 2018 Honda Odyssey sticker price “tops out at $45,925” and sales are slowing.

    Having grown up in a family of car dealers I can tell you if you aren’t getting a discount on the car, don’t buy the car. If no one will give you a discount on the car, choose a different car. You’re overpaying. At a minimum consider waiting out other fools who are overpaying.

    Of course I also believe that cars are generally the same, most nowaways come with sit down seats, push down breaks, see through windows and spin-around wheels regardless of price point. Your mileage may vary. But that’s the simple reason I didn’t buy a Tesla.

  3. Paying with a credit card when you need financing. He figured he could just take out a 0% loan on the car from his bank, but he couldn’t.

    You should only charge to your credit card what you can pay off right away. Never pay credit card interest. He took out a 0% balance transfer card, given his choices above and that he was transferring from a Chase product I’m guessing it wasn’t Chase Slate. So let’s assume he paid a 3% balance transfer fee. He overpaid for the miles and now has 14 months before he starts paying card interest. He’d likely have been better off financing through the dealership.

He didn’t even use the purchase to help earn a large signup bonus. And he didn’t earn any category bonuses. He got himself in trouble with the financing. And he likely overpaid both for the car and to finance the purchase.

Lessons:

  • Choose your card wisely to earn the most points
  • Only pay with a card if you already have financing in place or can pay the card off at the end of the month
  • Negotiate the price of the car first before talking about paying with a credit card. Rinse repeat from dealership to dealership. If you lead with credit card payment, the dealership’s charge for processing will be baked into the price of the car.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. I’m extremely surprised that the dealership let him use a credit card to buy the car. I inquired about this in the past, and dealerships always said they have a limit on credit card purchases. Obviously, the dealership doesn’t want to pay a percentage of five figures, which significantly cuts into their profit. Therefore, you must be absolutely right; he must’ve seriously overpsid for the car anyway!

  2. On a slightly similar note I paid for a new roof after hail damage ($17,00). The contractor reluctantly took my SPG AMEX and charged me the processing fee. What off set the fee was this was when AMEX was doing double points for doing business with a Small Business. So those 17,000 points turned into 34,000. And when I got my insurance check paid off the card and avoided any interest on the purchase.
    I figure getting SPG points for .01 is a pretty good deal.

  3. @Patrick: I’d imagine that the contractor is not allowed to charge you the processing fee. I know that MC/Visa do not allow it.

  4. I used to have a business situation where franchisees of the company I worked for used their personal points and miles cards to pay for marketing materials for their stores. This was neither surprising or a problem. The real issue was the poor choices of card to use most of these usually savvy entrepreneurs made. If you’re going to put a few hundred thousand dollars of float on a card, pick a good one.

  5. Too often points and miles clouds a better option. Financing through the dealership or your bank, if you must finance it, is typically the better option and doesn’t require you to pay the card off at the end of the month. And last I checked it’s a different type of bank loan to pay down credit card debt, those rates are higher due to higher risk, at least if the bank has a lien on a car they can recover much of the amount they loaned you.

    This guy needed to talk to his parents before making such a poor decision.

  6. @tommyleo: As of recent court action, credit card surcharges are now broadly permitted notwithstanding the terms stated by the credit card companies.

  7. @tommyleo He’s most likely just a bad negotiator. If he was paying for the car and not taking the incentives or negotiating at all for a car that isn’t selling, he definitely overpaid. I’m sure the dealer took those fees into consideration. Figure at 2.5%, the dealer is paying about $1,125 in fees. Knowing that is key to negotiating the price of the car down further.

  8. Sometimes dealers do take CC for entire payment of vehicle. Last car I bought was all CC (split among 5 different cards to complete sign up bonus spend on 4 and balance was on the BofA Travel Rewards — for which I’ve got PLT Honors bonus level of course).

    I knew I was getting a good deal since I was buying a low production-niche vehicle, so there are forums where folks discuss pricing. Thus, I knew I was getting a great deal before even walking in (effectively 26% below MSRP). Then the surprise of being able to use CC for all of it was just icing on the cake.

  9. I think the same can be said about women pretty much

    “Of course I also believe that cars are generally the same, most nowaways come with sit down seats, push down breaks, see through windows and spin-around wheels regardless of price point. “

  10. One thing to consider, many years ago we purchased the extended warranty on a new car. The dealer let us charge the entire amount to a card with no other fee (yes I’m sure these add-ons have their own larger profit margins).

    I decided that the extended warranty was a waste of money, so i cancelled it within the allowed period. The refund came to me as a check. That was an easy $3K or so in unintended rewards.

  11. this guy knows nothing about money. The car price can be negotiated for 8% or so, which is $3000, and balance transfer fee (3%) will be $1300, so he paid $4300 to “save” $650??? Such a genius!

  12. Gary I am surprised you aren’t parroting the new dealer pricing model refrain that consumers don’t need to negotiate anymore because the internet requires dealers to put their best foot forward in the form of a pre-discounted price. The margins on new retail sales are low single digits even with holdback and stair step money.

    As someone who claims to have ties to the auto industry you should know Honda NEVER offers 0%. The lowest for certain models for a Tier 1 customer is 0.9% but never 0%.

    Car dealers have been screwing consumers for far too long.

  13. If you’re down low enough in your negotiating they won’t let you pay by card because that’s another 3% they’re out. Maybe you can squeeze a little bit onto a card, $5k or so, but that’s it.

    Last car I bought I got $3.5k each on two different credit cards, then wrote a check for the rest.

    Best thing to buy with credit cards is furniture. You can still haggle and then charge it all. I put nearly $50K on credit cards 3 years ago after I moved and redecorated.

    Of course all this assumes you’re NOT leaving a balance. You’re an idiot if you do that.

  14. When I bought my current Prius in 2008 I used the Costco $500 deal, but I knew that you have to FIRST tell them it’s the Costco deal and so they immediately up the price accordingly to give you the $500 “discount”. After I learned that, I went to a different dealer and we negotiated for some days until I got the price I wanted, then I mentioned Costco. They had a fit and kicked me out but the boss called next day and agreed. When I got there and all papers were written up with the $500 Costco discount I mentioned my trade-in, which was my son’s car that hardly moved at all and was worth nothing (he had got stuck and I gave him my car as I was planning to buy a Prius anyway). They agreed to give me $500 sight unseen as long as I could drive it there, which I did. When I produced the green slip for ownership of course it was still in my son’s name! Another fit and I said I’d just come back in a week or two after I got that transferred – and they then agreed to the $500 for the trade-in but only if I took the car away again (I later sold it for scrap for $80) and as long as I bought the car that day.

    Then when everything was agreed I brought out my VISA card. Screaming, wailing, swearing at me … but it was the last day of September and they finally agreed to allow me to put $5000 on the card as long as I financed the balance. I asked if there was any prepayment penalty (like if I got a better loan from my bank in the next 30 days) and they said there was no prepayment penalty.

    So, I bought it, signed all the papers and the next day I paid the balance in full with the cash I was planning to use anyway (it was only around $25,000 before the CC charge). I think I got a great deal, mainly because I wasn’t in a hurry while they obviously were. And I am sure they still made whatever profit they could, so I don’t feel sorry for them.

    Point is: you can use the Costco deal but don’t mention it until you are in the finance man’s office ready to sign. Same with the CC, just don’t expect to pay for the whole car.

    Still have the car, regular services and no extra spend on it. Gets about 45 mpg on average.

  15. I just bought a car at a very good price. When I paid the finance guy he asked if I wanted to put the maximum amount on a credit card to get points. That was $1,500. BTW I hate car shopping/negotiating, and the car I wanted was considered “hot”, so I emailed 8 dealers within driving distance, told them exactly what I wanted and that I was purchasing the one with the lowest bid without any further negotiating, and to give me their best out the door price. One required a “package” be purchased, with floor mats, etc and was out. One offered to “match” my lowest quote and was out. Two came in very close to each other, about $900 less than the highest bid. I chose the one with the color I liked best, and the dealer drove it half way to me and did the hour long “how to set-up and use” in a parking lot. (I had asked if there was anything they would like to “throw into” their bid, and that dealer threw in the “meet me halfway.”) Most fun I ever had buying a car!

  16. I did a 1 pay lease for a MB E350 a few years back and put the charges on my MB Amex Platinum. I was able to get 5x MR points for the transaction without overpaying and no fees 🙂 Dealership had no problem at all running the transaction and I only had to reply to the text message about fraud protection from Amex for the charge to go through.

  17. The other stupid thing is that even on 0% credit cards there is usually a 3-5% transfer fee. so that 18 month’s 0% interest turns out to be a 2-3% APR.

  18. Gary there is so much I love about this story.

    And then I got here: “But that’s the simple reason I didn’t buy a Tesla.” Ok, that was two years ago I realize. But I totally thought you were going to link to this story:

    http://www.npr.org/sections/thetwo-way/2017/09/12/550445863/tesla-remotely-expanded-car-batteries-near-irmas-path-and-questions-linger
    “Tesla owners in Irma’s path got an unexpected range boost, raising questions about over-the-air changes”

    “Tesla owners who were in Hurricane Irma’s path in the Southeast recently got an unexpected boost to help them, after the carmaker remotely upgraded vehicle batteries to their highest capacity.

    “The boost gave customers’ cars an extra 30 to 40 miles, but it’s also temporary: The batteries will lose their extra juice this weekend.”

    Next up: paid business class for 1/2 the flight?

  19. I have bought a new Prius, a used Volt, a solar panel system and a roof, ALL on credit cards.
    1. Negotiate the price FIRST! Get the “out the door” price, with all the dealer added nonsense.
    2. Car dealers lie. They negotiate their credit card fee to around 1.1-1.4%, because of the large service volume. The 3% is a lie.You can tell, because their lips are moving.
    3. Be patient! This is a big purchase, don’t blow it.

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