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Car Loan-to-Value Ratio (LTV)
Definition
The ratio of loan amount to the vehicle's purchase price or value.
Explanation
Car LTV = (Loan Amount ÷ Vehicle Value) × 100. Lower LTV is better. Lenders prefer under 100%. Higher LTV means higher rates and may require gap insurance.
New cars with 20% down = 80% LTV (excellent). Zero-down financing with taxes rolled in can push LTV over 100% immediately.
Example
$25,000 loan on $30,000 car = 83% LTV (good). $32,000 loan on $30,000 car = 107% LTV (risky, immediately upside-down).