How Much Can I Borrow for a Car Loan?

Car loans are an excellent way to get together the money for a new car, one which you might not be able to afford if you were to pay the full amount upfront. Car loans come in all shapes and sizes — and you can borrow significant amounts of money if you’re able to convince your lender of your ability to repay the loan.

So how much can you borrow? The answer depends, of course, on your personal circumstances and financial situation. In this article, we’ll walk through the main factors that determine how much you can borrow for a car loan.


Why Get a Car Loan?

There are many good reasons to consider applying for a car loan, such as:

  • It allows you to afford a car you wouldn’t otherwise be able to, by breaking up the overall cost into more manageable regular payments over time
  • It frees up your income for other day-to-day expenses. By paying for your car in manageable chunks, you have more money left over for bills, groceries, savings, and leisure.
  • Paying off your loan on time allows you to build up a strong credit score which makes it easier to get better terms on other loans
  • Car loan payments are predictable, allowing you to plan your monthly budget with more certainty and confidence
  • At the end of your loan, it’s easy to trade in your car, with no need to worry about selling it


How Much Can I Borrow for a Car Loan?

The overall amount you’ll be able to borrow depends on a number of different factors. Here are the main things to consider.

Your Credit Score

The main thing your lender wants to know is how likely you are to pay back the loan on time, according to the terms of the agreement. Your existing credit score and past performance are their best guide here, so a strong credit score and a history of paying back loans in full and on time will allow you to borrow much more. Also, if you have any existing debts this will impact your ability to borrow.

Your Income and Employment Status

The amount you earn helps determine how much you will be able to pay per month, which of course affects the amount you’ll be able to borrow. On top of this, people with a steady job and fixed monthly income may find it easier to secure a loan than a self-employed person with a less predictable income.

The Length of The Loan Term

Generally speaking, the longer your loan term is, the more you can borrow overall. However, longer loans also typically come with higher interest rates.

Are You Trading in an Existing Vehicle or Making a Down Payment?

If you make a down payment in advance of the loan, or trade in an existing vehicle, you can considerably reduce the amount you have to pay. Alternatively, you can borrow the same amount you would have and pay for a more expensive vehicle. However, if you still owe money on the trade-in vehicle this will reduce the advantage you gain.

Work With a Broker

If you work with an experienced loan broker, like Lynam Home Loans, you can increase your chances of getting the best possible loan agreement. This is because brokers can search through large numbers of potential lenders to find the best deal possible for you, which may not even be available to the general public. On top of this, a good broker can help you avoid many of the pitfalls and challenges involved in getting a car loan and guide you through the entire process.


At Lynam Home Loans, we’ve been helping people in and around Mackay, Queensland get the best deals on their car loans for many years. Get in touch with us to find out how we can help you do the same.

Barry Lynam Mortgage Broker

Barry Lynam