1. What is Loan To Value (LTV)?

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. For auto loans, it compares the amount borrowed to the actual value of the vehicle being purchased.

2. How Does the Calculator Work?

The calculator uses the LTV formula:

Where:

• Auto Loan Amount — The total amount being borrowed for the vehicle
• Vehicle Value — The actual market value of the vehicle

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

3. Importance of LTV Calculation

Details: Lenders use LTV to assess risk. Lower LTV ratios generally mean better loan terms. Most lenders prefer LTV ratios below 80-90% for auto loans.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: What is a good LTV ratio for an auto loan?
A: Generally, an LTV below 80% is considered good. Above 100% means you're borrowing more than the vehicle's value.

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

Q3: Can LTV be more than 100%?
A: Yes, if you're borrowing more than the vehicle'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 purchase price or current market value (from sources like Kelley Blue Book).

Q5: Does down payment affect LTV?
A: Yes, a larger down payment reduces the loan amount and thus lowers the LTV ratio.