Feeling excited to buy a new car, but unsure how much you can afford?
You’re not alone.
Plenty of Australians feel confused about buying a car on finance. You want a new set of wheels, but you’re not sure if your income, expenses, or credit score is going to throw a spanner in the works.
The good news is that there are plenty of steps you can take to increase your borrowing power and we’ve rounded up five of the best to help maximise your borrowing capacity.
P.S. Buying your first car? Don’t spend a cent without reading our definitive guide
Table of Contents
What is borrowing power?
Your borrowing power (or borrowing capacity) is the maximum amount of money a lender is willing to lend you for a car loan.
This figure isn’t a direct measure of your income (so don’t stress if you’re not on a super high salary right now).
Your borrowing power comes down to a few key factors, including:
- Income Stability: What money is coming in (salary, wages, business income)?
- Existing Debts: What debts are you paying down (credit cards, HECS, personal loans)?
- Living Expenses: How much do you spend every month (rent/mortgage, utilities, childcare)?
- Employment: how long have you been at your job?
- Credit History: Are you generally good at paying your bills on time?
How to work out your borrowing power
Step 1: Gather your financial info
You can’t figure out how much you can borrow unless you know exactly what’s coming in.
To gather your financial info, you’ll want to have:
- Proof of Income: Dig out your latest payslips. If you’re one of the 2.3 million self-employed Australians, you’ll need your latest tax returns or financial statements as proof.
- Bank Statements: Having a few months of transaction history helps paint a clear picture of your regular money movements.
Step 2: Figure out your AFTER-TAX income
We’re talking about your net income here – this is the money that hits your bank account after tax, Super, and any other automatic deductions. This amount is the cash you have to work with.
Step 3: Add up your total expenses
Tally up every expense that’s essential to your life.
This includes:
- Rent or mortgage payments
- Groceries and household supplies
- Transport (petrol, public transport, current car costs)
- Utilities (power, water, phone, internet)
- Childcare, school fees, and dependants’ costs
- Existing debts (minimum credit card payments, other loan repayments)
- Insurance costs
Step 4: Calculate your disposable income
Alright, it’s time for a little math (it’s only a little, we promise!).
Subtract your Total Expenses (Step 3) from your After-Tax Income (Step 2).
The resulting figure is your disposable income. This is *theoretically* what you can comfortably allocate toward loan repayments each month.
FIDO SAYS: It’s worth pointing out that lenders often factor in a buffer (sometimes around 3%) to stress test your capacity. This is a hypothetical way of checking whether you could still afford repayments if interest rates were to rise.
Short on time? Try these three ways to calculate your borrowing power
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OPTION ONE
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OPTION TWO
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OPTION THREE
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Use a Simple Formula
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Use an Online Calculator
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Speak with Fido Finance
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A simple (but not super accurate) way to calculate your borrowing power centres on your Disposable Income.
Income - Expenses = Disposable Income that can go towards car payments. |
For a definitive and accurate result, consult with an expert.
At Fido Finance, our brokers work with a panel of 30+ lenders so we can get past the guesswork and give you a true measure of your capacity based on the best options available. |
How to improve your borrowing power in Australia
Whether you’ve crunched the numbers and feel underwhelmed at your suggested capacity or you’re looking to beef up your options before you apply for a car loan, your borrowing power isn’t set in stone.
We’ve rounded up the top five strategies our clients use (some with our assistance) to enhance their financial well-being and increase their borrowing potential.
#1 - Save for a larger deposit
This is one of the fastest ways to increase the money a lender will approve for your vehicle loan.
A larger upfront deposit reduces the amount you need to borrow, which reduces risk for the lender. Saving for a larger deposit also shows lenders that you’re financially responsible and serious about your purchase.
But let’s be honest, saving for a larger deposit can be easier said than done, so we’ve got a few more creative ways to impress lenders 👇
#2 - Cut back on living expenses
When you apply for a car loan, potential lenders take a look at your recent bank statements.
If they see a ton of non-essential spending (we’re talking about regular Uber Eats deliveries, multiple streaming services or weekly funds going into a gambling app), they might factor a higher-than-necessary expense figure into their calculation.
This doesn’t mean you need to snap your credit cards in half and live on a diet of two-minute noodles.
But temporarily cutting back on non-essential expenses before you apply for a loan can increase your disposable income, which can help you access higher borrowing limits from lenders.
#3 - Pay down existing debt
High-interest debt, especially credit cards (even if they’re not being used and paid off in full!), can significantly impact your borrowing power.
Lenders will look for consistent bill payments because if they approve you, you’ll have their auto loan as one of your regular payments.
Don’t have a ton of existing debt?
Firstly, congrats. 🎉
Secondly, here are a couple of practical tips to help improve your standing in the eyes of a lender:
- Assess your credit card limits: Lenders consider your limit, not just the balance you owe. If you have a $10,000 credit card limit, lenders treat you as potentially servicing that debt, even if your balance owed is $0. Reducing or cancelling unused credit card limits can dramatically improve your borrowing capacity.
- Pay off your personal loans: Paying off a personal loan (even if it’s small) frees up that monthly repayment amount, immediately boosting your disposable income.
#4 - Improve your credit score
Your credit score is your financial reputation and tells a lender how reliable you are.
A higher score makes you a more attractive borrower. It can also unlock access to better loan products and lower interest rates.
FIDO SAYS: Paying all your bills on time (we’re talking about your phone, internet, rent – everything) and ensuring you don’t have multiple credit applications in a short period are the quickest ways to polish your credit score.
#5 - Compare lenders and options
It’s a common mistake to assume all lenders operate under the same rules — they don’t!
Different lenders use different formulas, risk assessments, and interest rate buffers. That means one bank might deny your car loan application when another would approve it.
So, how do you know which lenders are right for you?
At Fido Finance, we do all the heavy lifting for you, comparing 30+ lenders to find the one that will give you the highest borrowing power at the best rate.
With our support, you can take the guesswork out of your application and spend your energy where it matters (like choosing the perfect bumper sticker for your new car).
Ready to see how much you could borrow? Get your obligation-free vehicle finance pre-approval
A quick word on responsible lending
Buying a new car is exciting, but our attitude at Fido Finance is that just because you can qualify for a certain amount, it doesn’t mean you should borrow the full sum.
Life is expensive (now more than ever), that’s why staying below that maximum threshold ensures you have flexibility for emergencies or sudden changes in your financial situation.
Don’t push yourself to the absolute limit. Give yourself some wiggle room, just in case.
🦴 Fido’s Fetched You Something: Everything You Need To Know About Financing a Used Car
Ready to maximise your borrowing power and unlock more options at the dealership?
Did you feel that?
It’s the exciting feeling of getting closer to buying your next car. With the tips in this guide, you’ve got a real action plan to calculate and easily apply for loans.
If you’re after a true measure of your borrowing power (not a rough guide or estimate), make the smart choice and apply through Fido Finance.
With decades of combined experience, our experts can help you:
✅ Access a panel of 30+ lenders (so you don’t have to do it all on your own)
✅ Enjoy proven results in maximising your borrowing power and securing approvals
✅ Use any equity you have in your current vehicle (if you plan to upgrade through a trade-in option)
Ready to see what we can do for you? Start an obligation-free conversation on 13 FIDO (13 34 36) or contact us online for a consultation.
