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Specialist Automotive Finance Practice Test

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When assessing affordability with multiple existing car loans, how should debt service payments be handled in the debt-to-income calculation?
Correct Answer:
Include all debt service payments
Explanation:
When assessing affordability, the debt-to-income ratio should reflect every recurring monthly debt obligation the borrower faces. For someone with multiple auto loans, this means adding up the monthly payments for all car loans and including that total in the debt portion of the calculation. This provides a true picture of cash outflows relative to income, preventing an over-optimistic view of what the borrower can handle. Excluding auto loan payments or counting only the largest loan would understate the true debt burden, and using a fixed percentage of the vehicle price wouldn’t measure actual debt obligations or income, making it unsuitable for DTI.

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