Not every car can check off the “excellent condition” box. Defining your car’s condition can be a tricky thing to do, but it’s best to be realistic. Most value guide websites will ask you to describe a car’s condition to receive a value estimate. Note the car’s conditionĪ car’s condition (fair, good or excellent) can impact LTV and loan approval. If you’re not purchasing a car through a dealership, the private seller’s car price (or private party value) may be taken into account when calculating LTV. You should also ask the lender which car value they will use to calculate the LTV – trade-in value, book value, loan value or retail value – to know which numbers to use in your calculations. Ask your lender which guides they prefer so you can get a better idea of what value they’ll be using in their LTV calculations. It’s good to visit each website because the car’s value may differ slightly between them. Use value guides like Kelley Blue Book, NADA, Black Book or Edmunds to get an accurate estimate of the car’s value. Figuring out your car’s value will give you a better idea of your LTV when it comes time to get a loan or refinance. There are a few easy ways to determine your used vehicle value. If you wait too long to refinance, your car may lose too much value compared to what you still owe on your loan, and you may not qualify for refinancing. Your LTV may be higher than when you bought the car if you owe more on your loan than the current car valuation. If time has passed since you got your original loan, your car has likely lost some of its value. And LTV will play a key role in what a lender offers you. Waiting for the right time to refinance your auto loan is crucial to getting the best deal. This can cause you to go upside down on your loan if the value of your car experiences depreciation faster than you can pay off your loan.Įmail Facebook LinkedIn Reddit Twitter Loan-to-value and refinancing an auto loan Negative equity: An LTV of 100% or more (meaning you’re borrowing the same amount or more than what the car is worth) means you have negative equity in your car.A low LTV won’t always translate into lower interest rates if you have bad credit scores. But remember, factors like your income and credit scores will also determine your interest rates. Interest rates: The lower your LTV, the better your interest rates will likely be.So you can’t bank on a low LTV to get your loan approved. Lenders will also look at your income and creditworthiness during the approval process. Approval odds: The lower your LTV, the better your chances of being approved for an auto loan and getting better loan terms.
Check with the lender to learn what their LTV limit is. For another lender, it could be close to 100%. Ideal LTV percentages: Every lender will have their own LTV limit – which is the highest LTV they’re willing to risk to give you a loan.These are some of the loan aspects that are affected by LTV: Lenders use LTV to assess loan risk, loan terms and loan approval. If you want to buy a $5,000 car and need a $4,000 loan, the LTV is calculated like this:Įmail Facebook LinkedIn Reddit Twitter How Does LTV Affect Auto Loans? LTV is expressed as a percentage and can be calculated using a simple formula: They want to ensure the loan amount won’t be much higher than the car’s value.Ĭalculating the LTV on your own before you apply for loans can help you determine which loans you may qualify for. When lenders look at your loan application, they’ll calculate the LTV to assess the risk they would take if they loaned you money. Loan-to-value (LTV) ratio for a car measures your auto loan balance compared to the value of the car. We’ll also give you a few tips to help you determine your car’s value.
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So let’s look at how LTV works for cars, how to calculate it and what it means for your auto loan. You can calculate your car loan’s LTV with a simple formula, but you’ll need to determine the car’s value first. Whether you’re in the car buying process, looking to get an auto loan or want to refinance your current auto loan, one factor that goes into a lender’s approval is your vehicle’s loan-to-value (LTV) ratio.