How a Car Loan Can Impact Your Home Loan – and What to Do About It

For many New Zealanders, buying a new car feels like a straightforward decision. You find a vehicle you like, check the weekly repayments, and if it fits the budget, you sign on the dotted line.

But if you’re planning to buy your first home or your next investment property, that car loan could have a much bigger impact than you realise.

Why Banks Care About Car Loans

When assessing a mortgage application, banks don’t just look at your income and deposit. They take a close look at your total financial commitments, including any personal loans, credit cards, and vehicle finance.

A common misconception is that lenders focus on the weekly repayment amount. In reality, banks assess:

• The total outstanding balance
• The interest rate on the loan
• The term and structure of the debt

Vehicle loans often carry higher interest rates than home loans. Because of this, they are treated as higher-risk debt, which can significantly reduce your borrowing capacity – sometimes by tens of thousands of dollars.

How a Car Loan Can Reduce Borrowing Power

Even if the weekly repayments feel manageable, a car loan can:

• Lower the amount the bank is willing to lend you
• Push your debt-to-income ratio outside acceptable limits
• Delay your ability to buy a home or investment property
• Force you into a smaller property or higher deposit requirement

In some cases, a new vehicle purchase can be the difference between an approval and a decline.

Car Loans Aren’t the Problem – Structure Is

It’s important to be clear: car loans are not a bad thing. Many people need reliable transport for work or family life, and vehicle finance can be a practical solution.

The issue is how the loan is structured and whether it aligns with your broader financial goals.

A poorly structured, high-interest car loan taken out at the wrong time can work against you. A well-planned vehicle finance solution, however, can sit comfortably alongside a future mortgage.

Planning Vehicle Finance With Your Home Goals in Mind

If you’re thinking about buying a home in the next 6 – 24 months, it pays to think strategically before committing to a car loan.

The right approach can include:

• Securing the best possible interest rate
• Choosing a loan structure that minimises impact on borrowing power
• Timing the purchase appropriately
• Ensuring repayments and terms align with your mortgage plans

At The Mortgage Hub, we look at the full picture – not just the car, but where you’re heading financially.

Strengthening Our Vehicle Finance Expertise

To better support our clients, we’ve added additional expertise to our team. Ryan Williams, who has over a decade of experience in vehicle finance, is now working alongside us to help clients make smarter decisions around car loans.

This means we can ensure your vehicle finance:

• Is competitively priced
• Is structured correctly
• Supports – rather than undermines – your home ownership or investment goals

Before You Buy, Talk to Us

If you’re car shopping over the holiday period or considering vehicle finance, it’s worth having a quick conversation first. A small decision today can have a significant impact on your ability to buy property tomorrow.

A car should support your lifestyle – not stand in the way of your long-term plans.

If you’re thinking about a car loan and a home purchase is on the horizon, get in touch with The Mortgage Hub before you sign anything.

Watch this video by our director Mils Muliaina on how a car loan can impact your home loan.