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

In Saskatchewan, Loan-to-Value (LTV) for a car loan represents the ratio of the amount you borrow to the vehicle's appraised market value. Lenders utilize LTV as a fundamental risk management metric, setting caps to mitigate potential losses should the vehicle's value decline rapidly or in the event of a repossession. While national standards apply, typical LTV caps often range from 100% to 120% for new vehicles, which can accommodate the financing of taxes and some additional products like extended warranties. However, for used vehicles, LTV caps are generally lower due to higher depreciation rates and varying market conditions.

Considering market conditions in 2025, lenders may exhibit increased conservatism with LTVs, potentially requiring stronger credit profiles or larger down payments from borrowers due to prevailing higher interest rates and tighter credit environments. A key provincial nuance in Saskatchewan is the 6% Provincial Sales Tax (PST) on the purchase price, which is commonly financed into the loan, thereby increasing the total amount borrowed and consequently your LTV relative to the pre-tax vehicle value.

For consumers, understanding LTV is paramount because it directly influences your required down payment, the total loan amount, and potentially the interest rate you qualify for. A lower LTV generally signifies less risk for the lender, which can translate to more favorable loan terms and a reduced likelihood of being "upside down" on your loan - owing more than the vehicle is worth - a critical consideration if you need to sell or trade in your car before the loan is fully repaid.