Loan-to-value ratio, or LTV, compares the amount of the auto loan with the vehicle's value. Lenders use LTV to help evaluate risk because the vehicle usually serves as collateral.
Auto loan LTV = loan amount ÷ vehicle value × 100. For example, if the loan amount is $22,000 and the vehicle is valued at $20,000, the LTV is 110%. The higher the LTV, the more the borrower owes relative to the vehicle's value.
| Loan amount | Vehicle value | LTV | What it means |
|---|---|---|---|
| $18,000 | $20,000 | 90% | Loan is below vehicle value. |
| $20,000 | $20,000 | 100% | Loan equals vehicle value. |
| $22,000 | $20,000 | 110% | Loan is above vehicle value. |
| $25,000 | $20,000 | 125% | Higher lender risk and possible negative equity. |
Because the vehicle typically secures the loan, lenders care about whether the vehicle value supports the amount borrowed. If the borrower defaults and the vehicle is repossessed, a high LTV can make it harder for the lender to recover the balance from the vehicle's value.
Down payment and LTV are closely connected. A down payment lowers the amount financed, which can lower LTV. Negative equity does the opposite if it is added to the new loan. For deeper reading, see Down Payment on a Car Loan and Negative Equity Auto Loans.
A higher LTV may lead to stricter lender requirements, a higher down payment request, fewer vehicle options, or higher borrowing costs depending on the lender. A lower LTV may make the loan structure easier for some lenders to consider, but it does not guarantee approval.
There is no single good LTV for every lender. In general, lower LTV means the loan is smaller relative to the vehicle value, which can reduce lender risk.
Yes. LTV can exceed 100% when the loan amount is greater than the vehicle's value, often because of taxes, fees, add-ons, or negative equity.
Not necessarily. It may increase lender risk, but approval depends on the full application, including credit, income, debts, down payment, vehicle, and lender guidelines.
A down payment lowers the amount financed, which can lower LTV if the vehicle value stays the same.
They are related. Negative equity means you owe more than the vehicle is worth. That usually means the LTV is above 100%.
Use LTV to think through down payment, trade-in value, and vehicle price before requesting auto loan options through the secure application.
This LTV guide was reviewed against auto-loan and collateral-risk education sources so the calculation, examples, and borrower takeaways stay practical.
Last reviewed: June 9, 2026