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

In Ontario, Loan-to-Value (LTV) for car loans is a critical metric calculated by dividing the total loan amount by the vehicle's appraised market value, not necessarily its purchase price. Lenders use this ratio to assess their risk exposure, typically capping it between 100% and 120% for new vehicles, and often lower for used cars depending on age, mileage, and condition. This appraised value is usually determined using industry-standard guides like Canadian Black Book or VMR Canada.

Why this matters significantly to you as a consumer: A lower LTV, often achieved through a substantial down payment, signals less risk to the lender, potentially qualifying you for better interest rates and easier approval. Conversely, a high LTV can lead to loan denial or necessitate a larger down payment to meet lender thresholds. Furthermore, a high LTV increases your risk of being 'upside down' on your loan - owing more than the car is worth - which can complicate future trade-ins or sales. In the Canadian auto finance landscape, particularly looking towards 2025, lenders are expected to maintain stringent LTV policies, influenced by economic conditions and a continued focus on responsible lending practices across the country. Understanding your LTV helps you secure favourable financing terms and avoid negative equity.

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