One Car, Two Cars, Red Car, Blue Car.

This is not the original Dr. Seuss line, but does this spin of the famous quote in his book dictate reality?

You can have one car, but can you have two cars?

In our day and age, it is often a necessity for a family to own two cars. Be it for a reason as simple as one parent using the car to commute to work while the other parent needs minivan access. It may also be relevant for one who buys and sells cars as a profession.

Put the pedal to the metal and let’s drive right into our question for today. 

Can I finance two cars (or three or four) in my name?

If you already have one car and want to buy a second card, is that an option? And if so, how?

Can I finance two cards in my name?

The answer is often yes. Legally, you can for sure finance more than one car.

But that does not mean anyone is able to finance more than one car, financially speaking. Not every lender will be willing to provide more than one loan to any consumer, due to the risk of the consumer defaulting on the loan.

However, for many, it may very well be an attainable goal to finance more than one car, even if your current car is HP car finance and your second car will be PCP finance.

You may be denied (even if you already sold your first car), and insurance may be higher on the second car, but despite these pitfalls, the answer may still be positive. 

To tackle the question, let’s talk about what makes it possible for you to finance a car. 

The list is based on, but not limited to, these elements:

• Income
• Current debt
• Your payment history
• Your credit
• And more.

According to Autorama, financial history is the most important factor to determine whether you can finance a second car.

For starters, in order to be approved for a car loan, the lender will look at your debt-to-income (DTI) ratio.

Debt to income ratio

Your debt-to-income ratio is the percentage of your income versus your debt, as the name implies.

To illustrate, if your DTI ratio is 50%, that indicates that you allot half of your income to paying your debt.

Your debt includes loans you have, and loans you are planning to take.

A high DTI ratio is not a good sign for lenders. If you show that your debt-to-income ratio is high, it won’t be easy for you to add a new car loan.

An ideal DTI ratio is approximately 40% – in which your income is high enough that only 40% of it needs to go towards debt. This ratio gives you the space to add debt to your current amount, providing you with the option of possibly financing a car. Just keep in mind that the preferred DTI ratio varies by lender. 

So high income is recommended. But here’s the thing. If you were approved for financing for your first car, the debt from that car may have pushed your DTI ratio over the approved limit. Now, you may be stuck if you want to finance a second car in your name. Your DTI ratio may be too high.

For example, let’s say you currently pay $1,800 monthly for a mortgage and $900 towards student loans.

So for a car loan, the lender will first determine whether your income covers these two expenses. Then the lender will judge whether your income can take a new car loan.

Now imagine if you ask for a second car loan. The equation would be $1,800 for mortgage, $900 in student loans, $600 for car loan #1, now can we factor in car loan #2?

It’ll be yet another expense to calculate into your debt and weigh the chances of your income being sufficient to pay it all.

To quote a statistic on Investopedia; “The average monthly payment for a new car in Q2 2023 was $729. For a used vehicle, it was $528. “

They say the price went up due to car owners choosing shorter term loans because of the higher interest rates.

I would like to mention that it may help you to get a cosigner with high income to sign on your loan. 

Why does my DTI ratio matter?

A car is a big expense. It doesn’t only entail buying the car; you also have to take into account car insurances and car maintenance fees. This includes oil changes, tires, annual registration, etc.

For your protection, and to ensure that you will be capable of making these payments, you will often encounter a maximum DTI ratio allowed when you try to apply for a car loan.

Because even once financing for the actual car is approved, you still need available funds for the above-mentioned expenses surrounding a car. And not to burst your bubble, but you will also continue to have your regular, day-to-day living expenses, which must also fit in your DTI ratio. Plus, having multiple vehicles may cause your insurance premiums to increase.

Investopedia reports the average loan interest rate in 2023, for new cars, was 6.63%, and 11.38% for used cars.

You can get an idea of what your insurance and maintenance totals will be by duplicating your current car fees. If the second car is similar to your current one, the total should give you a pretty accurate picture of what you will pay in insurance and maintenance fees if you finance a second car. Or you can use this car loan calculator.

When you do end up calling your insurance company to add a second car to your insurance policy, here’s some info you will need to have on hand:

• The year, make, and model of the car
• The vehicle identification number (VIN)
• The vehicle license plate number

Credit score

Not only does your debt-to-income ratio have to qualify for financing, so does your credit score. 

Since financing a car must be approved just like any other loan, you will have to show a good credit score so that the lender can trust that you will be responsible for making your payments and not take them for a joyride.

If your credit score is high, you have better chances of getting approved for financing for two cars. A high credit score usually reflects that you make on-time payments on your credit lines, and that you have established good relationships with credit lenders. 

For a first card, lenders look for an approximate score of 670-740. For a car loan the second time around, lenders may look for an excellent score of 800+.

Another reason to aim for a high credit score is because the higher your credit score, the better interest rates you will manage to close on. And that would save you money every month of your loan.

It may help to buy both cars at the same time

If you already have a car and you’re looking into buying a second one, then skip this tip. But if you have no car yet and would like to see yourself down the road with two cars, it may be worth it to buy two cars in one go.

Firstly, if you buy two cars and you buy them both from the same car dealership, you will better be able to negotiate a good financing plan.

And secondly, you will have more options for financing. 

Financing options: auto loan versus personal loan

So your options for financing are in terms of either an auto loan or in terms of a personal loan.

Two auto loans

You can take out two car loans and get yourself your two cars. That’s a secured auto loan, where the money you borrow must be used to buy a vehicle. Some lenders even have requirements for the type of vehicle you can buy; such as a minimum age of the car or maximum miles.  

With auto loans, your vehicle is used as collateral. So if you don’t pay back the loan, you may lose your car. 

You can usually only finance one car per auto loan, as most car loans are secured. So when you want two cars you need two auto loans. The car technically belongs to the lender while the loan is still going. Which means that the lender can take back the car if you fail to remit payment on the loan. In such circumstances, a lender will only be willing to provide one car for each auto loan.

You can, however, usually try to chip off a bit of the loan if you refinance your auto loan. The best time to do so is when interest rates are low. An ideal time to think about refinancing is after a year from starting the loan. 

Refinancing will help lower your monthly payments, and/or the interest.

What may be easier to get approved for than two auto loans, is a joint auto loan. This factors in your and your spouses credit scores so that you can each have a car.

Personal unsecured loan

With the amount of money two car loans add up to, you may choose to try going for an unsecured personal loan, or a home equity loan, which are our second options for financing a car.

This choice of loan will provide you with both cars in one payment, versus having to pay two separate car loans.

The money you borrow with a personal loan can be used for any purchase you wish, and there is no collateral. But if you default on a personal loan, the lender may try to get your personal assets or savings as payment.

A personal loan will probably be a larger payment per month. There may be a small chance of losing the vehicles if you can’t afford to keep paying towards your personal loan 🙁.

That being said, you might be eligible for a better interest rate if you go with a personal loan, versus an auto loan. You will also get the advantage of paying interest on one loan versus interest on two loans.

This is known as a multi-car discount. Your cars have to be parked at the same address in order to qualify when you register.

Loan extensions

You can usually get an extension on your car loan, depending on the lender. A good DTI ratio and a good credit score should be factors for helping you get an extension on your loan.

How to better your chances of getting approved for financing a second car

Finally, let me provide you with practical steps to take so that you have a better chance of getting approved for financing for a second (or even first) car.

Make payments towards current debt

As we discussed earlier in this post, a high DTI ratio might knock down your chances for financing.

To combat that possibility, try to pay down your current debt. This action will lower your DTI ratio for the better. 

If it makes it easier for you to wipe out some debt then you can consolidate all your debt to one loan. Doing so leaves you with one loan to cut, versus a few loans from different lenders.

You can even try to pay off your first car loan by following instructions here so that by the time you have a second car loan to pay, it’s the only car loan you have to worry about.

This may actually be a requirement in certain cases of pre approved auto loans.

Make sure you have good credit

Since good credit and a high credit score are one of the most important factors in getting approved for a car loan, you’d be well off working on cleaning up your credit.

Review your credit to make sure you don’t have any delinquent accounts. Pay down high or overdue balances. Make sure you have enough credit tradelines that are well tended to and show good credit history.

Also, check your credit report for potential errors that you can dispute. You can find a copy of your credit report at annualcreditteport.com, from all three credit bureaus: Experian, Transunion and Equifax. If you bump into an error, file a dispute with the credit reporting bureau.

When it comes to taking out a second car loan, if it’s close in time, your credit may still be down from your first car loan. 

This is due to the fact that when you have a new tradeline on your credit report it pushes your credit score down a bit. And your score remains down until the lenders are convinced that you will handle the credit line properly. So don’t dismiss the impact your current car loan can have on a second one. It may be very effective to ensure enough time has passed from your first car loan to your second one.

That’s in terms of your credit. But you might choose to get both cars at once, as we spoke about in a tip earlier on. That would minimize negative effects on your credit score.

Keep your rate shopping condensed

Each time you apply for a car loan, the lender will check your credit and do a hard inquiry. To avoid having multiple inquiries on your credit report, which bumps your score down by a few marks, do your rate shopping within a span of two weeks. Keeping it condensed will allow all hard inquiries to be combined to one, or very few, inquiries. This will protect your credit score from too harsh of an impact.

Start saving for a deposit

You can show lenders that you can afford another car by starting to save money for a deposit on a new car. Besides proving yourself capable of taking on another loan, saving money will also help you when the time comes to actually put money on the table for your new car.

Don’t reach out to many lenders in one shot

Even if you want to try your luck with as many lenders as possible, don’t request loans from too many lenders at once. They will not appreciate seeing multiple requests too close to each other.

Some more tips

• Put down a larger down payment.
• If you still can’t afford the second vehicle, maybe it’s time to find a car that’s cheaper and more affordable.
• You can try financing one car, while your spouse or partner, or adult child, finances the second one.

How to go about getting a loan

Now that you’re good to go, how do you get a car loan for a second car, or for two cars?

If you already took out a loan for car #1, it’s pretty much the same with car #2, or cars 1 and 2.

First you shop around for good rates from various lenders.

Once you decide on a lender, you can submit an application.

You hopefully will get approved.

Now, these steps are simple for a first loan. Taking the same steps for a second car loan can only be done after you meet all the requirements we outlined in this post. 

If you are in doubt whether you’ll manage a second car loan, you may be better off forgoing it. Think about it before you take the leap. If you mess up on an auto loan, you put your credit and your eligibility for future loans at risk.

In conclusion

So can you finance more than one car? It’s most certainly not impossible! But it depends.

If you have the income for two cars, and your debt-to-income ratio is low, you may be capable of managing two car loans. 

Whether you get approved or not will also be contingent on your credit score, amongst more factors. So try to pay down some debt and work on keeping a good credit score so that you increase your chances of getting approved.

And keep in mind that you may have more financing options if you buy two cars from one dealership at the same time.

So find the car you love, and work from there to secure a car loan. And don’t forget, a second car is a big commitment, so be cautious in all aspects and make sure you’re ready for it!