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. 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:

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

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

3. Importance of LTV Calculation

Details: LTV is a key factor lenders use to assess risk. Lower LTV ratios generally mean better loan terms, while higher LTVs may require additional insurance or result in higher interest rates.

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 for an auto loan?
A: Most lenders prefer LTVs below 80-90%. LTVs above 100% mean you're borrowing more than the vehicle's value.

Q2: How does LTV affect my auto loan?
A: Higher LTV ratios may lead to higher interest rates or require gap insurance to protect the lender.

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 the 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, resulting in a lower LTV ratio.