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 vehicles, it compares the amount of the auto loan to the actual value of the vehicle.

2. How Does the Calculator Work?

The calculator uses the LTV formula:

Where:

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

Explanation: The formula calculates what percentage of the vehicle's value is being financed. A lower LTV generally means less risk for the lender.

3. Importance of LTV Calculation

Details: LTV is crucial for lenders to assess risk and for borrowers to understand how much they're financing. Lower LTV ratios often qualify for better interest rates and may not require additional insurance.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: What is a good LTV ratio for a vehicle loan?
A: Typically, lenders prefer LTV ratios of 80% or less for auto loans. Higher ratios may require gap insurance.

Q2: How does LTV affect my auto loan?
A: Lower LTV ratios generally result in better interest rates and loan terms as they represent less risk to the lender.

Q3: Should I include taxes and fees in the vehicle value?
A: For LTV calculation purposes, use the actual purchase price or market value of the vehicle before taxes and fees.

Q4: What if my LTV is over 100%?
A: An LTV over 100% means you're financing more than the vehicle is worth, which can lead to being "upside down" on your loan.

Q5: How can I improve my LTV ratio?
A: You can improve your LTV by making a larger down payment, choosing a less expensive vehicle, or negotiating a better purchase price.