1. What is Loan To Value (LTV)?

The Loan To Value ratio is a financial term used by lenders to express the ratio of a loan to the value of an asset purchased. For auto loans, it compares the amount of the loan to the value of the vehicle being purchased.

2. How Does the Calculator Work?

The calculator uses the LTV formula:

Where:

• Loan Amount — The amount being borrowed for the vehicle
• Auto Value — The actual value or purchase price of the vehicle

Explanation: The equation calculates what percentage of the vehicle's value is being financed.

3. Importance of LTV Calculation

Details: LTV is a key metric lenders use to assess risk. Lower LTV ratios generally mean better loan terms and interest rates. Most lenders prefer LTV ratios below 80-90% for auto loans.

4. Using the Calculator

Tips: Enter the loan amount and auto value in dollars. Both values must be positive numbers. The result shows the LTV as a percentage.

5. Frequently Asked Questions (FAQ)

Q1: What is a good LTV ratio for an auto loan?
A: Typically, lenders prefer LTV ratios below 80%. Some may go up to 120% for new cars with additional products rolled into the loan.

Q2: How does LTV affect my auto loan?
A: Higher LTV ratios may result in higher interest rates or require additional insurance like gap coverage.

Q3: What's the difference between LTV and combined LTV?
A: For auto loans, LTV typically refers to a single loan. Combined LTV would include all liens against the vehicle.

Q4: Can LTV be over 100%?
A: Yes, if you're borrowing more than the vehicle's value (common when rolling negative equity from a previous loan).

Q5: How is auto value determined for LTV?
A: Lenders typically use the lower of purchase price or book value (NADA, Kelley Blue Book, etc.).