Can you finance two cars at once?

Buying a car can be a straightforward process — you set a budget, find a vehicle and apply for financing (or vice versa), make your down payment and drive away. But what if you’re buying more than one car or have another car you’re already paying for and need a second? Can you finance two cars at once? The shortest answer is, “it depends.” Let’s find out more about what having two car loans might look like.

Can you have two car loans at the same time?

Whether it’s one car loan or several, there are a few key factors lenders use to determine whether to approve your request for financing.

Credit Score

As with any loan application, your credit score plays a pretty big role in determining whether you’ll be approved for financing. If you have a higher credit score, you can often secure financing with lower interest rates and may have a higher likelihood of being approved for a second auto loan.

Debt-to-income ratio

As the name suggests, this is a comparison between your current income and existing debts, expressed as the percentage of your income going toward debt obligations. A debt-to-income ratio (DTI) of 50 percent, for instance, indicates that half of your current income goes toward paying debt.

A high debt-to-income ratio can be a sign that it may not be safe to allow you to take on additional obligations. Although requirements vary, most lenders prefer a borrower’s debt-to-income ratio to be somewhere in the low 40s. This number includes any potential loans you’re applying for, so the lender can assess the ability to pay the new debt on top of all existing debts.

In most cases, taking out a second car loan will increase your debt-to-income ratio. This increase may be enough to put your debt-to-income ratio beyond the limit to qualify for a second car loan.

Insurance and maintenance costs

Lenders set maximum DTI levels to help ensure borrowers can still manage other living expenses, including the costs to insure and maintain a new car. Assuming both cars are similar, you can essentially double your current insurance and maintenance costs to see how a second car might affect your budget.

Buying both cars at once

While buying two cars at once is a significant financial undertaking, it does provide some advantages to consider. Buying both cars at the same time, particularly from the same dealership, can give you additional negotiating power.

On the financing side, you can always apply for two car loans, or you may consider applying for an unsecured personal loan or home equity line of credit to purchase both cars at once. With the latter option, you’d only have a single payment to worry about, and you may even qualify for a slightly better interest rate since it’s a consolidated amount.

Tips to help get approved for a second car loan

If you’re looking to finance two cars at once (or even just one), addressing the following may help improve your chances of approval:

• Pay down existing debt: Paying down existing debts can go a long way toward lowering your debt-to-income ratio. If you follow certain steps to pay off a car loan faster, you may even be able to close out your current auto loan before taking on the new one. That way you'll still only have one loan at a time to manage.
• Focus on your credit report and score: Whether you’re thinking of buying two cars at once or just one car, and whether you’re doing it next month or a year from now, try to catch up on all outstanding or past-due payments, and stay up-to-date to ensure your credit score is as high as possible. Errors in your credit report may not be that common, but give your report a look and dispute any credit reporting errors you may suspect.  Having a strong credit report and score is key to being approved.

In summary

As you see, the answer to the question “Can you finance two cars at once?” really is “it depends.” Financing two cars is a significant financial undertaking, but it is certainly possible as long as you have the income to support the debt. Additionally, your credit score and debt-to-income ratio play a huge role in determining whether you’ll qualify for financing, so focus on paying down any existing debt and maintaining a high credit score to increase the likelihood of being approved. If you’re buying two cars at once, you may have additional negotiating power by purchasing through the same dealership.