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What to know about having two car loans

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It’s relatively simple to finance a car. But if you already have an existing loan and are looking to buy another car, getting a second loan can be a bit more challenging. You must have a good or excellent credit score — usually 670 or higher — to qualify for a lower interest rate. You will also need an adequate amount of stable income to cover the monthly payment on both car loans.  

What to prepare for when taking out a second car loan 

Even if you plan to sell your current car privately once you get a second vehicle, you could face roadblocks when you apply. Furthermore, insurance costs may be higher, and you could be denied credit from other lenders or creditors after taking out the second loan. 

Increased scrutiny from lenders 

Lenders evaluate your creditworthiness, current debt load, payment history and income to determine if you’re a good fit for a car loan. You will also be asked to provide detailed information about the vehicle so they can determine if the sales price is reasonable or more than what the car is worth. 

There is even more scrutiny when you take out a second car loan. Since you are trying to add more debt to your plate, the lender needs reassurance that you have the means to make timely monthly payments. But if you have a lower credit score or your debt load is high for your income, you could be denied financing 

Additional insurance costs 

Your auto insurance premiums will increase when you add a second car to your policy. The process is relatively simple, though, and shouldn’t take up much of your time. Be sure to have the vehicle identification number (VIN), year, make, model and license plate number handy when you call the insurance company.  

Some providers also offer discounts to customers who insure two or more vehicles on the same policy. It’s referred to as a multicar discount, and you will need to register and park all your cars at the same address to qualify.  

Difficulty finding credit after securing the loan  

Creditors and lenders assess your creditworthiness when you apply for debt products. A higher score means you pose less of a credit risk, and you could get approved for a credit card or loan product with favorable terms. But a low score could result in a denial or higher interest rate. Unfortunately, your credit score may take a temporary hit when you take out a second car loan, making it difficult to qualify for additional credit in the short term.  

Each time you apply for financing, a hard inquiry is generated. It could cause a temporary decrease in your credit score. However, you won’t get dinged for each hard pull if you shop for an auto loan within a specific time frame since FICO groups all the hard inquiries into a single inquiry. 

Your debt load will also increase after financing a second car. Since your credit utilization rate accounts for 30 percent of your credit score, your score will likely go down. However, it could rebound after a few months of timely payments to the lender since payment history is the most significant component of the FICO-scoring formula. 

How to improve your chances of getting a second car loan 

Here’s how to increase your approval odds if you’re looking to finance another car:  

  • Dispute credit report errors. Visit to get a copy of your credit report from the three major credit bureaus — Experian, TransUnion and Equifax. Review each page and circle any errors you notice. Once you’ve reviewed all three, file disputes with the appropriate credit reporting agency promptly since inaccurate information could be dragging down your credit score.  
  • Pay down revolving debt. Ideally, you should have a steady source of income that is more than enough to cover your monthly debt payments. The payments for installment loans are set in stone, but you can get a lower minimum payment on your credit cards and improve your debt-to income-ratio by paying down the balances.  

The bottom line 

It’s possible to take on a second car loan, and there are steps you can take to help you get a good deal. Get a copy of your credit report, view your score to see where you stand, and consider paying down revolving debt if your debt-to-income ratio is high. Ultimately, you want to prove to the lender that you’re a good credit risk and deserve to be approved for a second car loan with a competitive interest rate.  

Written by
Allison Martin
Allison Martin's work began over 10 years ago as a digital content strategist, and she’s since been published in several leading financial outlets, including The Wall Street Journal, MSN Money, MoneyTalksNews, Investopedia, Experian and
Edited by
Auto loans editor