Can I Get Another Car Loan If I Already Have One?

So, Can You Have Two Car Loans at Once?

• If You Have Two or More Breadwinners in the Home: If both spouses or life partners have jobs that require a commute and that commute can’t be shared in a single vehicle, owning two cars may well be a necessity, not a luxury.
• If You Sell or Trade Vehicles for a Living: There’s no shortage of collectors in the auto trade business who, for valid business reasons, may need to carry two or more auto loans simultaneously. While some individual auto sellers are committed to cash-only deals, some may prefer loan financing with a trusted lender. 
• If You Own More Than One Home: While this certainly qualifies as a problem many people would like to have, owning two homes may necessitate the ownership of two cars and two car loans at the same time. This is especially true for homeowners with residencies in two states. In that situation, it may make sense, at least for convenience’s sake, to hold two auto loans.
• If You Have a Small Business That Requires Two or More Vehicles: Many small business owners–think painters, contractors, florists, bakers, and other “on the move” trades–need two or more vehicles. Consider a landscaping company owner whose business is growing and needs more trucks to get workers to an expanding list of client sites. Financing multiple trucks and trailers is well worth it if a business is generating more profit thanks to those purchases.
• If Your Teenager Needs a Set of Wheels to Get Around: Many parents know the reality of having to buy an extra car to get a college-bound son or daughter to campus (and give them a way to get around once they’re there).

Getting Approved for a Second Auto Loan While You Already Have a Car Loan

Don’t Take Out Two Auto Loans on One Vehicle

Know the Qualifications for a Second Loan Approval

• Your Credit History: Personal credit remains the primary barometer for auto lenders deciding whether or not to approve a second car loan. You’ll need to show you’re making on-time payments, you’re not overusing credit (i.e., keeping your debt to income ratios low), and you have a robust FICO® score. Any score over 700 puts you in prime position for a second auto loan.
• Your Annual Income: Since you already have an active auto loan that hasn’t been repaid, lenders will focus particularly on your income. Specifically, the lender usually wants to see if your income can easily cover a second auto loan. Since auto purchases also lead to additional expenses, like maintenance, repair, gasoline, insurance, and state registration fees, your annual income should be able to handle not only the car loan, but the expenses that go with auto ownership.
• Debt to Income Ratio: Overall household debt compared with income, meaning the debts you’ve accumulated balanced against your personal financial assets, is a big deal to auto lenders reviewing a second auto loan application. Ideally, your debt-to-income ratio would be about 35% debt to 65% assets. More debt could lead to an auto loan rejection.
• The Second Vehicle’s Value: Auto lenders will also study your second car’s estimated value. In general, the less expensive the vehicle is, the better your chances of getting a second auto loan approved. It’s simple math weighed against risk. The less cash you borrow, the better your odds of repaying the loan. 
• Your Down Payment: Additionally, it’s helpful to bring a hefty down payment. Anything more than 20% of the vehicle’s estimated value is likely to help your cause with a lender.

Consider Getting a Cosigner

Taking on a Personal Loan vs. a Traditional Auto Loan

• Interest Rates: Personal loans usually have higher interest rates than traditional car loans, with the rate ceiling  on a personal loan at approximately 36% and the ceiling on a regular car loan at about 20%
• Loan Terms: Loan repayment timelines are about the same with both personal loans and traditional auto loans. Personal loans usually need to be paid back within two to seven years while a regular car loan repayment period stands at between three to seven years.
• Down Payments: Down payments are not required for a personal loan but they usually are required with traditional car loans.
• Loan Fees: Personal loan fees can be as high as 8% in some instances, whereas loan fees for regular car loans usually range between 1% and 2%.
• Collateral: Personal loans for autos typically require no collateral. That’s not the case with traditional auto loans, where the vehicle itself is usually the collateral.

The Takeaway