You may find that you can finance a second vehicle depending on your credit standing and debt-to-income ratio. If you can provide your lender with valid proof of income and the lender determines you can afford to pay another car loan, you are likely to obtain a loan approval.
Debt-to-Income Ratio
Your auto loan provider determines your approval based on the amount of money you have coming in and the amount of money you owe, known as a debt-to-income ratio. Your credit report lists your total debts, including monthly payment requirements for credit cards, loans and mortgage balances. A potential lender can also view secondary accounts, or debts that you share with someone else, such as a co-signed auto loan or a shared mortgage. Even with an excellent credit score, you may be declined for a loan if your lender rates your debt-to-income ratio poorly.
Employmment and Address Considerations
Expect to provide proof of income, employment and address information to your lender. Most lenders prefer to see at least two years of stable address and employment history. If you have moved multiple times or just started a new job, your loan may be declined. Your lender uses your year-to-date income on your most recent pay stub to determine your actual income. If you recently received a raise, the lender might not apply it to your income; most lenders figure gross annual income based on a verifiable year-to-date statement instead of the income you plan to make.
Considerations
Before you apply for a second car loan, consider the total cost of owning two vehicles, which costs more than loan payments alone. Lenders require a consistent, full-coverage insurance policy on loan vehicles, which may prove expensive. Check the cost of adding another vehicle to your insurance policy. Check also with your dealer or the auto shop where you maintain your current vehicle to determine the total costs of maintenance. Ensure you can comfortably afford owning two vehicles.
Preapproval
To determine whether you can obtain a second car loan, apply to an auto loan provider for a pre-approval before you head out to shop. Your lender may offer an approval with restrictions. You may have to provide a down payment or may find that your approval requires you to stay within a certain monthly payment, which restricts your vehicle price range. Depending on your approved term, interest rate and down payment, you may have to adjust your price range.
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