The Loan-to-Value (LTV) ratio is a crucial metric in auto financing. It represents the relationship between the amount you are borrowing for a vehicle and the vehicle's actual value. In simpler terms, it's a percentage that shows how much of the car's worth is being financed.
The formula for calculating Auto LTV is straightforward:
LTV = (Amount Financed / Vehicle Value) * 100
In this calculator:
Vehicle Purchase Price: This is the total price you are paying for the vehicle, including any taxes, fees, or add-ons. It serves as the benchmark for the vehicle's value in this calculation.
Amount Financed: This is the actual amount of money you are borrowing from the lender to purchase the vehicle. This typically excludes any down payment you might have made.
Why is LTV Important for Auto Loans?
Lenders use the LTV ratio to assess the risk associated with a car loan.
Lower LTV (e.g., 80% or less): Generally indicates lower risk for the lender. This can lead to better interest rates, more flexible loan terms, and easier loan approval, especially for buyers with less-than-perfect credit. It means you have a significant equity stake in the vehicle from the start.
Higher LTV (e.g., above 100%): Indicates higher risk for the lender. This often occurs when the loan amount exceeds the vehicle's value, which can happen due to rolling negative equity from a previous loan into a new one, or financing excessive add-ons. Lenders may be hesitant to approve these loans or may offer less favorable terms.
Example Calculation:
Let's say you are buying a car with a Vehicle Purchase Price of $25,000 and you are financing $20,000 (Amount Financed).
LTV = ($20,000 / $25,000) * 100 = 0.8 * 100 = 80%
In this scenario, the LTV is 80%. This is often considered a good LTV by lenders, suggesting a moderate level of risk.
Using our calculator helps you quickly determine your LTV and understand how it might affect your auto loan application.
function calculateLTV() {
var vehiclePriceInput = document.getElementById("vehiclePrice");
var loanAmountInput = document.getElementById("loanAmount");
var resultDiv = document.getElementById("result");
var ltvValueSpan = document.getElementById("ltvValue");
var vehiclePrice = parseFloat(vehiclePriceInput.value);
var loanAmount = parseFloat(loanAmountInput.value);
if (isNaN(vehiclePrice) || vehiclePrice <= 0) {
alert("Please enter a valid Vehicle Purchase Price.");
return;
}
if (isNaN(loanAmount) || loanAmount < 0) {
alert("Please enter a valid Amount Financed.");
return;
}
var ltv = (loanAmount / vehiclePrice) * 100;
ltvValueSpan.textContent = ltv.toFixed(2);
resultDiv.style.display = "block";
}