How to Calculate Loan-to-Value on Used Vehicles

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The asking price of your used car is not necessarily the same as the car's value.
The asking price of your used car is not necessarily the same as the car's value. (Image: Creatas/Creatas/Getty Images)

The loan-to-value ratio shows the relationship of the amount of money that you're receiving as a loan relative to the value of a vehicle on a percentage scale. Ideally, lenders want you to borrow less than 100 percent of the car's value, though some will loan you more to cover the cost of taxes and fees. Getting a loan-to-value on a used car is more complex because the value of the car is not as straightforward as a new model. Lenders may approach the calculations using different values, but you should be able to get an estimate.

Look up the value of the used car in the Kelley Blue Book or the NADA guide. The online versions take your location and mileage into account when determining a value. You'll have to enter details about the car, such as transmission style and features, which can also affect the value.

Divide the amount of the loan you desire by the value from Step 1. The amount of your loan may simply be the price that you negotiated with the sales representative or car owner. It may, however, be more due to taxes and fees, or less, due to a down payment.

Multiply the result by 100. This will give you a percentage as the loan-to-value. For example, if you want to borrow $7,500 for a car with a $10,000 value, your loan-to-value is 75 percent.

Tips & Warnings

  • Prior accidents or mechanical problems can lower the car's value. These issues would not necessarily be included in the Kelley Blue Book or NADA values. Always look at the Carfax report, which some dealers provide free of charge or which you can order through Carfax.com, and have a mechanic look at a used car before you make a purchase.

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