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You can have two car loans. As long as you're legitimately approved for them, there is no limit to the number of car loans you can have. However, lenders can deny additional loans if factors such as your credit score or debt-to-income ratio (DTI) don't fit their requirements.
There are steps you can take, such as paying down other debts, that could increase the likelihood a lender will approve you for a second car loan. Adding another car payment will require carefully assessing whether it fits into your budget based on your current income and expenses.
If you're in the market for a second car loan, here's what to know.
How Many Car Loans Can You Have?
There is no universal limit to the number of car loans you can have in your name. The only restrictions are whether lenders approve you for a new loan, and whether you can afford it.
For example, if you've missed a car loan payment in the past, that will hurt your credit and impact whether you'll qualify for a second car loan. Even if you're approved, a lower credit score—or a higher DTI, since you currently have other debt—could mean paying a higher annual percentage rate (APR) or getting approved for a lower loan amount than you need.
On the other hand, if you have a good credit score and earn enough income to comfortably manage the payments, you may be easily approved for a second car loan.
Factors That Lenders Look at When Reviewing an Auto Loan Application
Lenders typically review the following data when considering your application for an auto loan:
- Credit score: Lenders will look at your credit score to help determine your approval chances and APR. They may even use the FICO Auto Score, which is a more specialized scoring model than the general purpose FICO® Score☉ or VantageScore® credit score. But the criteria that matter for loan approval don't vary much by score type. Making all loan payments on time and limiting the amount of debt you carry will contribute to a strong credit score no matter which model the lender uses to evaluate your application.
- Income: Having a consistent source of income helps lenders feel confident you'll make regular payments. They may also look at your employment history and how long you've been at your current job. By law, lenders cannot ignore income from part-time jobs, retirement accounts or public assistance like disability insurance when making credit decisions.
- DTI: Your DTI is the percentage of your pretax monthly income that you contribute to debt obligations. So if you earn a gross income of $4,000 per month and pay a total of $1,500 a month toward student loans, a mortgage, a car loan and minimum credit card payments, your DTI would be 37.5%. Auto lenders generally prefer borrowers to have a gross DTI of 50% or less.
- Desired loan amount: Lenders also consider the car's loan-to-value ratio (LTV) when reviewing your application. LTV is the amount of an asset's value the lender will finance. For example, a car's LTV would be 90% if you make a down payment equivalent to 10% of the car's value. A lender may be more likely to work with you if you make a higher down payment and your car has a lower LTV, especially if you don't have good or excellent credit.
- Car make and model: The type of car, and whether it's new or used, can also affect your loan approval odds and the interest rate you receive. Loans for used cars, for example, generally carry higher interest rates than new car loans, no matter your credit score.
Should You Get Another Car Loan?
Before taking out another car loan, make sure you understand the details of the new financing you're offered, and how it will fit in with your existing debt payments. Take a look at the following for both loans:
- Loan terms: Check the repayment term (such as 48, 60, 72 or 84 months) to understand how long you'll be paying off each loan. Identify any taxes or fees charged that add to the loan cost.
- Interest rate: The APR on a second car loan will have a big impact on its affordability. Look into ways to reduce the loan's APR, such as by improving your credit beforehand or choosing a shorter loan term. That may get you a lower interest rate, since there's a lower chance you could lose your job or have difficulty repaying in a shorter time.
- Monthly payment: Use a car payment calculator to determine your monthly payment based on your APR, loan term and loan amount. If you don't already have a budget, use a budgeting method like the 50/30/20 budget to determine whether the car payment is affordable. According to this method, all essential expenses, including debt payments like a car loan, should add up to no more than 50% of your take-home pay.
- Auto insurance costs: You'll need to pay for auto insurance on the additional car. This is an additional expense you shouldn't ignore—along with maintenance, repairs and gas. When you finance a car, the lender will typically require comprehensive and collision insurance coverage, which will cost you more than minimum insurance coverage.
In general, it makes more sense to take out an additional loan if you're almost done paying off your current loan, or if you expect an increase in income or decrease in other expenses. It doesn't make sense to take out a new loan if the additional monthly payment would limit your ability to pay other bills or save for emergencies, retirement or other goals.
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How to Get Approved for a Second Car Loan
When it's time to apply for a second car loan, taking the following steps may give you a better shot at getting approved:
- Pay down debt. Reducing DTI is a key way that you can prepare for a new car loan application. Make extra payments toward your existing car loan, credit card balances, student loans, personal loans and other debts, if possible. Or increase your income by getting a raise or taking on extra work.
- Improve your credit. Lowering your amounts owed may also help boost your credit score, which can increase your chances of loan approval. Other ways to improve credit include keeping your oldest accounts open, disputing inaccurate information on your credit report and becoming an authorized user on a loved one's well-managed credit card account. As of the third quarter of 2024, auto loan borrowers with the highest credit scores paid an average APR of 5.08% on a new car loan, compared with an average APR of 15.43% paid by those with the lowest credit scores, according to Experian data.
- Pause on applying for new credit. Avoid applying for other credit cards or loans leading up to your car loan application. Hard inquiries, which appear on your credit report when a lender checks your credit, have a slight but temporary negative effect on your scores. Minimizing hard inquiries can help keep your credit score as strong as possible.
The Bottom Line
There are no legal or lender-based restrictions on having multiple car loans. You can have two car loans at the same time, as long as you've been approved for them on the basis of your credit, income and other factors.
Whether two car loans will put a strain on your budget is another question. Before taking out an additional loan, confirm that you have a sufficient emergency fund and that you'll be able to afford other expenses, and work toward other savings goals, at the same time.