How does the bank determine its loan-to-value ratio for car loans?

I want to buy a car with tons of extras, but they don't show up on car value estimators. I know the bank uses these values to determine if I can buy the car. How do they determine the loan-to-value ratio?

Answer
Calculating your car’s loan-to-value ratio (LTV) is an important step in securing a car loan. Here’s how lenders do it. First, they check with the National Automobile Dealers Association (NADA) to determine the actual cash value (ACV) of your vehicle.
Then, they’ll take the loan amount requested and divide by the ACV to get the LTV. Lenders like to see LTVs of 100% or less. If the LTV is above 100%, you’re asking for more money than the car is worth, at least according to the lender’s appraisal.
If you have a car with tons of extras that don’t show up in the ACV, you may still be able to get the loan amount you request—even if your loan-to-value ratio is higher than 100%. Many lenders will offer 120% LTV loans for qualified buyers. Usually, you’ll need a great credit score to qualify.
If you manage to secure the loan, make sure your sweet new ride is properly protected with a full-coverage insurance policy. Download the Jerry app to compare dozens of competitive quotes and find the best rates in your area.
Eric Schad
Answered on Oct 29, 2021
Eric Schad has been a freelance writer for nearly a decade, as well as an SEO specialist and editor for the past five years. Before getting behind the keyboard, he worked in the finance and music industries (the perfect combo). With a wide array of professional and personal experiences, he’s developed a knack for tone and branding across many different verticals. Away from the computer, Schad is a blues guitar shredder, crazed sports fan, and always down for a spontaneous trip anywhere around the globe.
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