What is Loan-to-Value (LTV)?

Loan-to-Value (LTV) is the ratio between the loan amount you're requesting and the value of the car you're purchasing. Lenders use LTV to determine risk. The sales price doesn't affect your approval—only the value of the car does. The lower your LTV, the more attractive your application looks to the bank.

How LTV is Calculated

LTV = (Loan Amount ÷ Vehicle Value) × 100
For new vehicles, lenders use the MSRP as the vehicle value. For used cars, they rely on Wholesale Blue Book value—not the sticker price. This makes used vehicle LTV harder for consumers to calculate without dealership support.

Why LTV Matters to Banks

Banks set different LTV limits, often ranging from 90% to 125%. A higher LTV means greater risk. If a loan goes unpaid and the car is repossessed, the bank wants to avoid a loss. That’s why banks cap loan amounts based on what they could recover at auction.

The Role of Negative Equity

When you trade in a car and owe more than it’s worth, that’s negative equity. Example: You owe $19,000 on a vehicle worth $10,000. That $9,000 gets rolled into your new loan. But not every vehicle can "absorb" that extra debt.

A $21,000 vehicle may only allow a $23,100 loan (110% LTV), absorbing just $2,100 of negative equity. A $50,000 car at the same ratio can absorb up to $5,000. Choosing the right car is critical when you’re upside down on your trade.

How Wheeler Dealership Helps You Navigate LTV

At Wheeler, we don’t just sell cars—we strategize financing. Our team works with multiple lenders and understands their unique LTV caps and preferences. Based on your credit profile and goals, we’ll guide you to the right vehicle that aligns with your financing reality.

Tips to Improve Your LTV Position

• Make a Down Payment: Even a small amount reduces your LTV.
• Choose Higher-Value Cars: Some models retain value better, helping with loan flexibility.
• Pay Off Negative Equity: If possible, clear or reduce existing loan balances before trading in.
• Ask About GAP & Warranty Options: These can be included in LTV for some lenders—but not all.

When to Wait Before Trading In

While it’s true that making a few more payments can improve your loan-to-value (LTV) ratio—especially after the first year when loan balances tend to drop faster than depreciation—negative equity isn’t always predictable. Market conditions, newer model releases, technological advancements, and design changes can all accelerate depreciation, sometimes outpacing your monthly payments.

That’s why instead of simply advising you to wait, we recommend coming in for a personalized evaluation. At Wheeler, our experts will assess your unique situation and guide you toward the most strategic time and structure to trade in your vehicle. This way, you’re not left guessing—you’re making informed decisions that position you for the best possible outcome.

Let Wheeler Be Your Financing Partner

We want to get you into the best vehicle for your financial situation, not just sell you something fast. LTV is a tool, and we know how to use it to your advantage. Let our experts paint the right picture to the lenders and maximize your approval odds.