The Ultimate Guide to Buying a Car With Bitcoin

Introduction

In the span of just over a decade, Bitcoin has gone from a little-known digital currency experiment to a mainstream financial asset with a market capitalization exceeding $1 trillion. As Bitcoin‘s value and popularity has soared, a growing number of businesses have started accepting it as payment – including a select group of innovative car dealerships.

That‘s right, you can now buy a car with bitcoin. From mass market makes like Honda and Nissan to luxury brands like BMW and Lamborghini, there are dealerships that will gladly take your bitcoin in exchange for a new set of wheels.

Buying a car with bitcoin offers some compelling advantages, such as fast and final settlement, a high degree of privacy, and the ability to make a large purchase without moving money through the traditional banking system. For bitcoin holders, it‘s also a way to cash out some crypto gains and convert them into a tangible asset.

However, bitcoin‘s notorious volatility and the risk of hacks and scams means buying a car with crypto isn‘t quite as simple as signing a check or swiping a credit card. In this guide, we‘ll explain exactly how the process works, what you need to get started, and what to watch out for when buying your next car with bitcoin. Let‘s get started!

The Growth of Bitcoin Car Buying

While Bitcoin has been around since 2009, it‘s only in the last few years that car dealerships have started to take notice and set up the infrastructure to accept it as payment. The trend started with a handful of luxury and exotic car dealers that were quick to recognize bitcoin‘s potential with a high-end clientele.

One of the first was Post Oak Motor Cars, a Rolls-Royce, Bentley and Bugatti dealership in Houston, Texas that started accepting bitcoin in 2018. Company owner Tilman Fertitta told CNBC that the decision to accept crypto was a "no brainer" given bitcoin‘s popularity and his luxury dealership‘s tech-savvy customer base.

Since then, bitcoin has gradually made inroads at dealerships selling more mainstream brands. In 2019, Subaru of Glendale in California sold a WRX for bitcoin. In early 2021, a Nissan dealership in Nevada and a Honda dealership in Florida announced they would start accepting bitcoin payments.

The most high-profile example came in February 2021 when Elon Musk announced that Tesla would start accepting bitcoin as payment for its electric vehicles. The news sent shockwaves through the automotive and crypto communities and was seen as a major step towards mainstream adoption of bitcoin.

Just how many dealerships currently accept bitcoin is hard to pin down, as new ones are added frequently and no centralized database exists. A crowdsourced directory called Spend Bitcoin lists nearly 200 car dealers worldwide that accept bitcoin as of March 2021, up from just a few dozen a year prior.

The directory includes sellers of major brands like Ford, BMW, and Toyota as well as pre-owned dealers and peer-to-peer car buying platforms. The U.S. has the highest concentration of bitcoin car dealers, but the trend is catching on globally with dealerships accepting crypto in Canada, Europe, Asia and Australia.

It‘s still a small fraction of the estimated 20,000 new car dealerships and 140,000 used car dealerships worldwide, but the growth trajectory is clear. As bitcoin‘s price and mainstream acceptance continue to rise, so too will the number of dealerships accepting it as payment.

So just how much bitcoin is being spent on cars? While firm numbers are hard to come by, luxury dealers have reported some high-dollar bitcoin sales:

In 2018, a buyer purchased a $240,000 Ferrari 599 from a dealership in Newport Beach, CA using bitcoin
The same year, Post Oak Motor Cars sold a $533,000 Rolls-Royce Phantom for bitcoin
In 2019, an anonymous buyer purchased a $4 million Lamborghini Aventador S using bitcoin through a broker
BitCars, an online marketplace for exotic vehicles, claims to have facilitated over $300 million in bitcoin car sales since 2017

These headline-grabbing sales aside, the average bitcoin car purchase is likely much more modest. Industry insiders estimate that 3-5% of the cars sold by crypto-friendly dealers are currently purchased with bitcoin, with the majority still transacting in cash or conventional financing.

However, many dealers see accepting bitcoin as a way to attract younger, tech-savvy buyers and gain a competitive edge. Some report that bitcoin buyers tend to be more decisive and make faster purchasing decisions compared to traditional customers.

Stephen James BMW, a U.K. dealership that‘s accepted bitcoin since 2018, has noticed that crypto payments are especially popular with its i8 hybrid sports car buyers. General Sales Manager Stephen James told AutoTrader that bitcoin appeals to the i8‘s "fast and furious" customer base that‘s keen to embrace new technologies.

How to Buy a Car With Bitcoin

If you‘ve got some bitcoin burning a hole in your digital wallet and have your heart set on a new ride, here‘s a step-by-step guide to making it happen:

Step 1 – Get a Bitcoin Wallet

Before you can start shopping for your dream car, you‘ll need a secure way to store and spend your bitcoin. Bitcoin wallets come in several varieties, including desktop, mobile, web, and hardware wallets.

Desktop wallets are software that you install on your computer, while mobile wallets are apps that run on your smartphone. Web wallets are hosted by a third party and accessed through a web browser. Hardware wallets are physical devices that store your bitcoin offline for added security.

Whichever type you choose, be sure to pick a well-established wallet provider with a track record of security and reliability. Some of the most popular bitcoin wallets include:

Coinbase Wallet (mobile and web)
Blockchain.com Wallet (mobile and web)
Mycelium (mobile)
Electrum (desktop)
Ledger Nano S (hardware)
Trezor (hardware)

Once you‘ve chosen a wallet, you‘ll need to transfer the amount of bitcoin needed for the car purchase into it. If you don‘t already own bitcoin, you‘ll need to buy some through a cryptocurrency exchange like Coinbase, Gemini, or Binance.

Step 2 – Find a Bitcoin-Friendly Dealership

The next step is to locate a car dealership that accepts bitcoin. You can often find this information on the dealership‘s website or by searching online directories like Spend Bitcoin or Bitcoinwide.

Some examples of dealerships that currently accept bitcoin include:

AutoCoinCars (online marketplace)
BitCars (online marketplace)
Post Oak Motor Cars (Houston, TX)
Subaru of Glendale (Glendale, CA)
Reed Jeep (Overland Park, KS)
Albany Honda (Albany, GA)
Stephen James BMW (London & Kent, UK)
Daytona Nissan (Daytona Beach, FL)

It‘s a good idea to contact the dealership ahead of time to verify that they still accept bitcoin and to ask about their payment process and policies. Some may use a bitcoin payment processor like BitPay, while others may have an in-house system.

You‘ll also want to check if the dealership immediately converts the bitcoin to cash or if they keep it on their balance sheet. If they keep the bitcoin, the final price could be subject to fluctuations in bitcoin‘s value between the time of sale and when the transaction settles.

Step 3 – Negotiate Purchase Price and Make Payment

Once you‘ve found your dream car at a bitcoin-friendly dealership, it‘s time to make a deal. The negotiation process works the same as with any car purchase. You‘ll haggle on the price, discuss add-ons and fees, and come to a final sale price.

When you‘re ready to seal the deal, let the dealer know you want to pay with bitcoin. They will typically provide you with a wallet address where you need to send the agreed-upon amount.

Before transferring the bitcoin, double check that the wallet address is correct. Bitcoin transactions cannot be reversed, so if you send it to the wrong address, you may have no recourse to get your money back. Consider sending a small test amount first to verify everything is set up properly.

You‘ll also want to be mindful of the transaction fee associated with your bitcoin payment. The fee amount varies based on network traffic but can range from a few cents to upwards of $50. Some wallets let you adjust the fee to speed up transaction processing if needed.

Once the dealership receives the bitcoin, they will transfer the title and registration to you, and you‘ll be the proud owner of a new (or used) car purchased with crypto. The whole process can be completed in a matter of minutes, making it a fast and convenient alternative to traditional financing.

Step 4 – Report Bitcoin Spending on Taxes

The IRS views spending bitcoin as a taxable event akin to selling an investment. When you buy a car with bitcoin, you‘ll need to calculate your cost basis for the crypto spent and report any capital gains.

For example, say you bought 1 bitcoin for $30,000 and later spent 0.5 bitcoin on a $20,000 car purchase when bitcoin was valued at $40,000. You would have a cost basis of $15,000 for the half bitcoin you spent and a $5,000 taxable capital gain ($20,000 – $15,000) to report.

There are several bitcoin tax software tools like CoinTracker and BitcoinTaxes that can help you generate the necessary forms based on your wallet activity. However, it‘s best to consult with a qualified tax professional to ensure you stay compliant with all relevant regulations.

Risks and Considerations

While buying a car with bitcoin may sound like a futuristic dream, it does come with some risks and drawbacks to consider:

Price Volatility – The price of bitcoin can fluctuate significantly in a short period of time. If bitcoin‘s price drops sharply before your bitcoin transaction is complete, you might end up overpaying for the car. Some dealerships may adjust the price or ask for more bitcoin to cover any shortfall.
Irreversible Transactions – Unlike credit card charges, bitcoin transactions can‘t be reversed if you have a problem with your purchase. You‘ll have little recourse if the car turns out to be a lemon.
Hackers and Scammers – Buying a big ticket item like a car with bitcoin can make you a target for cybercriminals. Scammers could try to trick you into sending bitcoin to the wrong address or hackers could target the dealership‘s wallet. Only deal with reputable dealerships and practice good cybersecurity.
Limited Consumer Protections – Buying a car with bitcoin may void some consumer protections you‘re used to, like the ability to dispute a charge or get your money back if the dealership goes out of business. Be sure to understand the terms of the sale and the dealership‘s bitcoin policies before committing to a purchase.
Maintenance and Repair Costs – While you might buy your car with bitcoin, you‘ll still need to pay for insurance, registration, maintenance, and repairs in traditional currency. Some service centers are starting to accept bitcoin, but most will require cash or a check.
Tax Reporting – Calculating capital gains on bitcoin spent can be a headache come tax time. Make sure you keep detailed records of your purchase and consult with a tax professional to stay compliant.

Despite these challenges, many in the industry believe bitcoin car buying will only become more common in the years ahead. "The trend is definitely upward," said Alec Gutman, founder of AutoCoinCars. "As the value of cryptocurrencies continues to rise and more businesses start accepting them, we expect to see a lot more car purchases with bitcoin and other digital currencies."

The Future of Bitcoin Car Buying

While still a niche phenomenon, the convergence of the automotive and blockchain industries is gaining momentum. In addition to accepting bitcoin payments, car companies are exploring other applications of cryptocurrency and blockchain technology:

Tokenized Car Titles – In 2020, the German company Mobility Open Blockchain Initiative (MOBI) launched a standard for recording car titles as non-fungible tokens (NFTs) on a blockchain. This could pave the way for simplified title transfers and new types of fractional car ownership.
Blockchain-Based Supply Chains – Auto manufacturers like BMW, GM, and Ford are using blockchain to track parts through their global supply chains. This helps verify the authenticity of components, reduce counterfeit parts, and enable more efficient recalls.
Secure Car Sharing – Startups like Oaken and Filecoin are using blockchain to power decentralized car sharing networks. Car owners can rent out their vehicles when not in use and earn cryptocurrency for doing so.
Crypto-Based Car Financing – Companies like Axis Auto Finance and AutoFi are using blockchain to streamline the car financing process and offer more competitive rates. Blockchain‘s ability to securely store and share financial data could lead to near-instant loan approvals and new types of peer-to-peer financing.
Autonomous Vehicle Payments – As self-driving cars become a reality, many believe they will rely on blockchain and cryptocurrency to enable secure, autonomous payments for things like charging and parking. IOTA and VeChain are two blockchain projects working on this use case.

In the short term, events like Tesla‘s bitcoin buying announcement and the ongoing bull market in cryptocurrencies will likely encourage more car dealers to start accepting bitcoin. There are also efforts underway to give bitcoin legal tender status in more jurisdictions, which could make using it for car purchases as mundane as using traditional cash.

Looking further out, it‘s not hard to imagine a future where buying a car with bitcoin is the norm rather than a novelty. With the rise of blockchain-based supply chains, decentralized finance, and autonomous vehicles, the automotive industry seems destined for a digital currency upgrade.

"I believe that within the next five to ten years, we‘ll see a majority of car purchases happening with some form of cryptocurrency," said Alec Gutman of AutoCoinCars. "It‘s the logical next step in the evolution of money and commerce."

Conclusion

Buying a car with bitcoin may seem like a daunting prospect at first, but it‘s really not much different from a traditional car purchase. With a little research and preparation, you can use your digital currency to drive off the lot in a new set of wheels.

As more dealerships start accepting bitcoin and the infrastructure for cryptocurrency payments improves, the process is only going to get easier and more streamlined. We may not be at the point where you can walk into any dealership and pay with bitcoin, but that future may be closer than you think.

In the meantime, if you‘ve got some bitcoin to spend and have your heart set on a new ride, follow these steps: get a secure bitcoin wallet, find a reputable dealership that accepts crypto, agree on a fair price, and make the transfer with careful attention to detail. Before long, you‘ll be cruising down the highway knowing you‘re on the cutting edge of the digital economy.

Just remember to buckle up, stay safe, and enjoy the ride!