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Financing Two Cars at Once: Everything You Need to Know


Can you finance two vehicles at the same time? This is but one of the questions people looking for an auto loan ask.

People have different reasons for owning multiple cars at the same time. The most probable being is you have one for your spouse, children, or a car for emergencies (such as if the main vehicle stops working). Whatever the reason may be, borrowing from a bank to finance a new vehicle purchase will depend on a few factors.

The following discussion will guide you through the answer of whether you can finance two cars at once.

What Is An Auto Loan?

An auto loan is a credit facility that enables you to buy a car or truck. Most car loans are simple-interest credit facilities payable within 3 to 5 years, depending on the lending institution.

You can get a car loan from banks, private lenders, or credit unions. Motor vehicle dealers may arrange financing with credit institutions and allow you to get a car on credit for a certain period of time.

The purchase cost of a car can run into the thousands. An auto loan therefore allows people on a budget to own a vehicle with flexible installments.

How Do Car Loans Work?

As stated above, car loans are simple-interest credit facilities where the lender advances you money to be repaid in monthly installments consisting of the principal amount and interest. For example, if you want to buy a $25,000 car, your lender may ask for a downpayment amount of a certain percentage. If you pay a $2500 down payment or 10% of the car value, the balance of $22,500 is the principal amount. Subsequently, lenders will apply interest on the principal amount.

There are two types of interest applicable, fixed and variable interest rates. For fixed interest rates, the interest component in the monthly installment remains the same throughout the loan tenure. In variable interest loans, the interest component changes depending on the principal balance. This explains why it’s also known as the reducing balance.

The payments are costlier for long-term auto loans because the interest remains the same. Keep this in mind when comparing different types of lenders.

How long it takes to repay your auto loan depends on a few reasons:

1. Credit Rating

If your credit score is low or average, your repayment period may be shorter.

2. Annual Income

Shorter loan tenure is recommended if you can afford to pay higher installments.

3. Size of the Loan

If you’re buying a high-cost model, your lender may spread the loan over a longer period. However, the total interest payable will be higher for longer-duration loans.  These days, lenders can offer loan tenures of upto seven years for high-cost vehicles.

Can Your Lender Finance Two Cars Simultaneously?

Whether your lender can finance two cars at once depends on if you are able to pay. Your lender may grant you two auto loans if you show that you can pay the monthly installments.

There are several ways your lender can assess your ability to pay:

Income Sources

The first option is to look at your income history and assess whether you can manage the monthly installments. If you’re a salaried person, the lender will look at the income remittance and check if there are regular remittances.

They will look at the pattern of deposits and payments made to your account for business income. At this point, you’ll have to submit supporting documents such as a business license, payment vouchers, and sales receipts.

Debt-to-income Ratio (DTI)

The debt-to-income ratio is an important metric lenders use before approving loan applications. The DTI ensures that your income is sufficient to cover your auto loan payments and other debts such as credit cards, student loans, and mortgages.

The recommended DTI is usually 40% for borrowers. However, lenders may prefer a lower DTI because it also translates to a good credit score and rating.

In simple terms, your DTI enables your lender to assess whether you can afford to pay your auto loan.

Credit Score

Your credit score is essential to your auto loan application since it depicts your past payment behavior or history. Your lender uses the credit score to evaluate your credit worthiness.

Lenders get credit reports from the three leading reporting agencies: Equifax, Experian, and Transunion. If your score is too low the application may be declined or postponed to a future date until it improves.

The lender will have no problem approving a credit application with a good credit score. You might even enjoy longer payment terms and low-interest rates.

Regardless, it’s vital to be aware of the factors that influence credit reports and work towards improving your score. For example, avoid having many open accounts as these may have running charges. Secondly, pay your bills on time or set reminders to ensure you pay on time. Lastly, have one credit card and consider debt consolidation.

Can you get multiple car loans at the same time? After your lender ascertains and verifies your credit application, there is no reason why they can’t grant you such a loan.

Just be sure to read the loan agreement before signing, and ask questions if you feel there’s something that needs clarification. Watch out for hidden charges in the agreement and other ambiguous clauses.


Many lenders approve auto loan applications by considering the factors mentioned here. Your cars will be used as collateral for the loan, and failure to pay can lead to repossession. It’s therefore important to keep up with the loan installments and have a good credit rating.

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