1. What is Loan-to-Value (LTV) Ratio?

The Loan-to-Value (LTV) ratio is a financial term used by lenders to express the ratio of a loan to the value of an asset purchased. In car loans, it represents how much of the car's value is being financed.

2. How Does the Calculator Work?

The calculator uses the LTV formula:

Where:

• \( Loan \) — The amount being borrowed for the car
• \( Value \) — The actual value of the vehicle

Explanation: The formula calculates what percentage of the car's value is being financed by the loan.

3. Importance of LTV Calculation

Details: LTV is crucial for lenders to assess risk. Lower LTV ratios generally mean better loan terms and lower interest rates. Most lenders prefer LTV ratios below 80-90% for car loans.

4. Using the Calculator

Tips: Enter the loan amount and vehicle value in dollars. Both values must be positive numbers. The calculator will compute the LTV percentage.

5. Frequently Asked Questions (FAQ)

Q1: What is a good LTV ratio for a car loan?
A: Generally, an LTV below 80% is considered good, while above 100% means you're financing more than the car's value (negative equity).

Q2: How does LTV affect my car loan?
A: Higher LTV ratios may lead to higher interest rates or require gap insurance. Very high LTV might result in loan denial.

Q3: Can LTV be more than 100%?
A: Yes, if you're borrowing more than the car's value (common when rolling over negative equity from a previous loan).

Q4: How is vehicle value determined?
A: Lenders typically use the lower of the purchase price or current market value (NADA or Kelley Blue Book values).

Q5: Does down payment affect LTV?
A: Yes, a larger down payment reduces the loan amount, resulting in a lower LTV ratio.