Car Loan-to-Value Ratio (LTV)
Quick Answer
The ratio of loan amount to the vehicle's purchase price or value.
Definition
The ratio of loan amount to the vehicle's purchase price or value.
Explanation
Car LTV = (Loan Amount ÷ Vehicle Value) × 100. Lower LTV is better. Lenders prefer under 100%. Higher LTV means higher rates and may require gap insurance.
New cars with 20% down = 80% LTV (excellent). Zero-down financing with taxes rolled in can push LTV over 100% immediately.
Example
$25,000 loan on $30,000 car = 83% LTV (good). $32,000 loan on $30,000 car = 107% LTV (risky, immediately upside-down).
Frequently Asked Questions
What is Car Loan-to-Value Ratio (LTV)?
The ratio of loan amount to the vehicle's purchase price or value.
How does Car Loan-to-Value Ratio (LTV) work?
Car LTV = (Loan Amount ÷ Vehicle Value) × 100. Lower LTV is better. Lenders prefer under 100%. Higher LTV means higher rates and may require gap insurance.New cars with 20% down = 80% LTV (excellent). Zero-down financing with taxes rolled in can push LTV over 100% immediately.
Can you give an example of Car Loan-to-Value Ratio (LTV)?
$25,000 loan on $30,000 car = 83% LTV (good). $32,000 loan on $30,000 car = 107% LTV (risky, immediately upside-down).
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