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In NB, what should I know about loan-to-value (LTV) for car loans?
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Car Loan Glossary • nb

In NB, what should I know about loan-to-value (LTV) for car loans?

In New Brunswick, as across Canada, Loan-to-Value (LTV) for car loans is a critical metric representing the loan amount divided by the vehicle's appraised value or purchase price, whichever is lower, as determined by the lender. Lenders impose LTV caps to mitigate their financial risk, ensuring that the collateral's value adequately covers the outstanding loan in the event of default and potential repossession. Typical LTV limits vary significantly; new vehicles might see caps allowing financing up to 100-120% (often including NB's 15% HST, registration, and extended warranties), while used vehicles generally have lower thresholds, perhaps 80-100%, depending on age, mileage, and condition.

For consumers in NB, understanding LTV is crucial because a higher LTV can necessitate a larger down payment, influence the interest rate offered, or even affect loan approval. Furthermore, financing above 100% means you start with negative equity, where you owe more than the car is worth, a scenario that can be exacerbated by current 2025 market conditions with potentially fluctuating used car values and higher interest rates. Your personal creditworthiness, income, and the specific vehicle's depreciation rate also play a significant role in a lender's LTV assessment and the terms offered.

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