Quick answer: A car loan can materially reduce home-loan borrowing capacity because its repayment is an existing commitment. There is no reliable universal rule such as '$30k car loan equals $300k less mortgage'. Have the mortgage position modelled using your actual car repayment before committing.
Questions borrowers commonly ask
- If I finance a $50k car, will it kill my roughly $1m pre-approval?
- I already have a car loan — how much does it reduce borrowing power?
- Does a balloon help because the current repayment is lower?
Mortgage servicing is cash-flow driven
The actual car repayment, remaining term and the home lender's servicing model can all affect the result.
Finance versus cash
Financing preserves deposit cash but reduces serviceability; paying cash does the opposite.
The overlooked option is a cheaper car
A lower vehicle amount can preserve both more cash and more mortgage serviceability.
General information only. Approval, pricing, fees, income treatment and vehicle eligibility depend on the lender, borrower circumstances and contract.
Frequently asked questions
How much does $500/month reduce borrowing?
There is no universal conversion.
Does balance matter too?
The overall debt position can matter.
Does a balloon help?
It can lower current payment, but the full debt structure still matters.
Should I pay cash?
Compare serviceability benefit against deposit loss.
When should I model this?
Before signing car finance.
Sources and verification
Related GPS Finance resources
Need a car finance option matched to the actual situation?
Tell us the vehicle, amount and profile before making another lender application.
