Last updated on May 13th, 2020
Between credit cards, mortgages, car payments and student loans, American consumers are saddled with a lot of debt. This can make buying a vehicle tricky, since most people don’t want to add to their overall dues. Can a credit card like the Dodge DrivePlus Mastercard® help?
Muscle Cars and American Debt
Americans love muscle cars; Dodge has been a fan favorite since they began to produce fast, sexy cars in the early 1950’s. While some have been discontinued, models like the Challenger get an update each year. Americans love to spend their hard-earned money on vehicles for both work and play, and the muscle car is an American institution for many. The Challenger is an iconic sports car. Beloved by many, it can be found on the road in its classic form together with its more modern iterations. The “holy trinity” of American Muscle – the Chevrolet Camaro, Dodge Challenger, and Ford Mustang contributed approximately 1% of total U.S. car sales. These three vehicles are currently the most common muscle cars on the road in the United States. Despite only contributing to 1% of total car sales, the popularity of muscle cars is easily illustrated by this statistic. After all, that number includes only three car models. There are thousands of types of cars that make up the total sales for 2019. A car is one of the most expensive purchases one can make. The average classic muscle car costs between $25,00 and $30,000. Due to this, when buying a vehicle Americans will finance part, or all, of their purchase. At last estimate, Americans owe more than $1.2 trillion in auto loans. Add a mortgage, a financed smartphone, and/or financed furniture, and many Americans are saddled with debt. Outside of a traditional auto loan, is there an alternative way to fund our love of Dodge cars? The Dodge DrivePlus Mastercard® holds the answer.
What is the Dodge DrivePlus Mastercard®?
The Dodge DrivePlus Mastercard®, designed specifically for the lovers of Dodge vehicles, is a viable alternative to an auto loan. Boasting several benefits only available from the dealership, it’s geared towards everyone who loves Dodge cars and trucks. These perks are, simply put, not available to anyone who finances their Dodge Challenger using a traditional loan. The card can be used when purchasing a new vehicle at any Dodge or Fiat Chrysler Automobiles (FCA) dealership and is designed to incentivize the purchase of a vehicle. It can be used for other purchases too, although the yield for earning rewards will not be as high. FCA awards each new cardholder account a $1,000 bonus certificate when that person spends $7,500 or more within the first year. The certificate can only be used towards the purchase of a new FCA US vehicle. This makes the bonus useless, unless the cardholder plans to use their card to buy that beautiful Dodge Challenger they’ve been eying. The bonus would then offset the amount charged to their card. This sort of benefit is unheard of from a traditional auto loan. Rewards earned from card use are worth approximately $0.01 per point if redeemed for cash back, travel rewards, or gift cards. When redeemed directly at the dealership, those point values increase. This is designed to encourage cardholders to spend more at Dodge. Purchases that earn points at the dealership can include a new vehicle, but also auto parts and maintenance. This means that bringing a Dodge vehicle that you currently own in for oil changes and brake alignments will boost the points you earn. These points can be accumulated over time to help offset the purchase of a new vehicle.
Using a Credit Card to Buy A Car
A credit card is a powerful financial tool when it comes to spending and saving money. Using a credit card to make a large purchase can save money in the long-run, especially if it has an introductory APR period and favorable interest rates. Add cash-back rewards and points that can be redeemed for merchandise to the mix, and cardholders can really maximize their savings. Credit cards can be used for virtually any purchase, provided the item’s price tag doesn’t exceed the cardholder’s credit limit. It’s common to finance an expensive purchase like a mattress, a new couch, or a computer using a credit card. Financing a vehicle using a credit card can be a bit trickier, but it’s definitely within the realm of possibility. There are even co-branded auto rewards credit cards that feature perks and benefits for car lovers. The Dodge DrivePlus Mastercard® falls into this latter category.
Related article: What Are Auto Rewards Cards and Are They Worth Getting? Here’s how a credit card compares to a traditional auto loan:
An auto loan’s terms will vary based on the lender, as well as the individual’s financial situation and preferences. Factors like income, credit score, and the type of vehicle being purchased are all used to determine the terms of the loan. Certain lenders offer loans for up to 84 months. The average auto loan is between 36 to 60 months. In contrast, a credit card doesn’t have set terms like a loan does. While the credit card’s minimum monthly payment is like a loan’s monthly payment, the two are fundamentally different. Firstly, a credit card balance is fluid. Each purchase increases the amount a cardholder must pay in a given billing period. Secondly, the minimum payment amount changes each month based on the cardholder’s spending, while a loan has a set payment. These loan terms are not as flexible, and do not increase or decrease each month based on spending.
An auto loan’s interest rates, like the APR assigned to a credit card account, is determined by the applicant’s finances. The interest rate a credit card applicant receives is tied directly to their credit score, their debt-to-income ratio, and their financial history. An auto loan takes this into account along with several other factors. For example, the interest rate assigned to an automobile purchase is different for a new vehicle versus a used vehicle. The interest rates for a credit card typically are variable and can change at the discretion of the issuing bank based on the Prime Rate and the market. Auto loan APRs are typically less prone to fluctuation – although a variable-rate loan will also react to the Prime Rate. The average credit card APR is approximately 15.1%. On the other hand, the average auto loan APR is approximately 5.3%. While this represents a significant difference, remember that auto loans are must be completely paid off by an agreed-upon date. Debt from credit cards can extend infinitely, hypothetically – and this higher interest rate reflects the risk the bank takes.
Credit cards are most often issued for everyday use, not for purchasing an automobile. Still, a vehicle purchase is within the realm of possibility here. Credit cards traditionally have a credit limit. This limit represents the maximum amount of money that a client can spend using their card at any given time. Card issuers determine the credit limit for each applicant based on their financial history, their credit score, and their income. They also look at how many open credit cards an applicant has. A higher credit limit is a higher risk for banks; because of this, the average credit limit is not high enough to pay for a new vehicle in full. Although many credit limits are not high enough to pay for an entire vehicle, credit cards can be used to make partial payments. On the other hand, an auto loan is tailored to the vehicle being purchased. Lenders will look at the applicant’s finances and the overall cost of the car. They also consider how much money the potential buyer is willing to contribute as a down payment.
The biggest draw for using a credit card to buy a vehicle is the availability of rewards programs. Auto loans do not offer perks and benefits. Therefore, a rewards program is one of the biggest differentiators between a credit card and a loan. Many credit cards offer loyalty programs that feature rewards like cash back, miles for travel, and points for merchandise and gift cards. Some credit card issuers take this a step further by designing rewards programs for car lovers. The DrivePlus Mastercard® program is the perfect example of this. An auto loan may not boast rewards in this way but makes up for it with a lower interest rate. The Dodge DrivePlus Mastercard®, along with the other FCA Driveplus Mastercard® credit cards, are a great alternative to a traditional auto loan. To maximize savings when using a credit card to pay for a vehicle purchase, remember to only charge what you can pay off immediately. Additionally, auto dealers may limit how much of the purchase you can put on a credit card. That said, with proper planning a credit card can be a powerful tool for saving money when purchasing a vehicle.