Great question! I’m happy to say that to determine the LTV, you can simply divide the loan amount by the actual cash value (ACV) of the car.
The reason that this ratio is important is that it identifies potential risk in the loan. A car that has an LTV of more than 100% has a loan value that is higher than the value of the car. If you defaulted on this loan, the lender wouldn’t get their money back even if they sold the car at auction. Therefore, they can decline this loan, offset the risk with a higher interest rate, or only extend the offer to highly qualified buyers.
Best of luck with your loan!