Can you finance two cars on one loan?

A conventional auto loan does not give you the option to buy two cars with one loan. This is because a single car is often tied to the loan as collateral, which the lender can resell if you default on your payments. 

Having said that, it’s worth speaking to lenders directly if you are looking for this sort of loan arrangement. Some people choose to use personal or home equity loan if they wish to borrow enough for two cars.

People have two car loans for various reasons. Perhaps you and your partner both have financed cars, or maybe you have a home car and a work car. If you are taking out two car loans to purchase one car for personal use and the other for your business, you might be eligible for some tax deductions on the business car. When you take out a loan to buy a vehicle for use in your business, the interest you pay on it is a business expense, and you might be able to claim it as a tax deduction. 

No matter the number of cars or car loans you have, it’s important to shop around for the best deal. If one lender is offering a cheaper rate and lower fees, you could always switch both loans to that lender or try to negotiate a deal.

No, having two car loans at the same time shouldn’t affect your credit score adversely if you continue to make your repayments on time. However, if you cannot keep up with your repayments, your credit score could go down, and you might even lose your car in some situations. 

Having two car loans means you’ll be making two monthly payments, which could strain your household budget. If you plan to take out a second car loan, it could help to work out your repayments using an online calculator and run the numbers by your household budget to check whether you can afford two repayments or not.

Having multiple loans also affects your debt-to-income ratio (DTI), which can impact your suitability for future credit. Debt-to-income ratio is a financial measure used by lenders to determine how much of your income goes towards repaying your debts. You can calculate it by dividing your total debts by your annual income. 

Generally, a DTI of six or above is considered risky, as lenders believe a significant portion of your income is going towards servicing your debts. They think this could put you under financial stress if the interest rates were to suddenly rise or there’s a sudden change in your financial situation. Lenders may thus limit the amount of money you can borrow or even reject your loan application if your DTI is high depending on the level of risk they are willing to take.

If you are struggling to keep on top of two car loans it may be worth considering consolidating these into one, easier-to-manage loan. A debt consolidation loan may be able to help you combine two car loans into one, meaning you only have one repayment to manage and one interest rate to be charged. 

Just like when you applied for the original two car loans, be sure to compare your options to ensure the debt consolidation loan best suits your financial needs and budget.