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How big of a car loan can I get?
I currently drive a Ford F-350 pickup truck, which is great in winter or when I need to haul my trailer, but it’s not the most practical vehicle for my 80-mile round trip commute to work. I’ve been shopping around for a second car for commuting, but I’m not entirely sure what my price range is. How large of a car loan can I be approved for?
Jack Walsh · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
Purchasing a second vehicle that can save you money on your commute is a great idea, but it’s challenging to predict how big of a
car loan
you can get. The amount you’re approved for and the interest rate are determined on a case-by-case basis. When determining the interest rate and amount you can borrow, lenders rely on many factors, including:
- Credit score
- Income
- Employment status
- Debt-to-income ratio
To find out how much you can borrow, you should apply for preapproval for a loan with multiple lenders. When you’re preapproved, you don’t need to have a vehicle chosen yet, but the lender can provide you with how much they are willing to lend and at what interest rate. Additionally, applying through multiple lenders allows you to compare offers and find the best agreement available.
Keep in mind that you can get approved for more than you can afford, so you should review your budget before signing an agreement. A general rule of thumb is to save for a 20%
down payment
, have a loan term that is four years or less, and the total car payment should not exceed 10% of your income. Also keep in mind that when you finance a vehicle, lenders will require full coverage car insurance. Before you add the second vehicle to your
car insurance
policy, you can ensure you’re getting the best rate using Jerry
, an insurance comparison app that shops for low prices with over 50 different insurance companies for free. If you decide to switch companies, Jerry will take care of all the paperwork and even help cancel your old policy! View full answer
- Gregory R.
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Jerry partners with more than 50 insurance companies, but our content is independently researched, written, and fact-checked by our team of editors and agents. We aren’t paid for reviews or other content.
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