What are the typical loan-to-value (LTV) ratios offered for used car loans?

The loan-to-value (LTV) ratio plays a very important role in a used car loan application. The loan-to-value ratio is the percentage of the car’s current market value that a lender is willing to you. For used vehicles in India, the usual LTV ratio is somewhere between 80% and 90% of the assessed value of the car.

The LTV ratio you are offered is dependent on many factors:

• Age and condition of the car: Newer and well-maintained vehicles may qualify you for a higher LTV ratio, while an older or higher-mileage vehicle would likely be offered a lower LTV ratio.
• Borrower's credit profile: If you have a robust credit score and a steady income, you are more likely to be offered a higher LTV which would reduce the down payment.
• Lender's internal policies: Every lender sets their own criteria, and one lender may be more lenient than another.
• Car's make, model as well as demand: A make and model that is popular with a good resale value may offer higher LTV.

Choosing a higher LTV may mean paying a higher interest rate, especially if banks and NBFCs can take on more risk. Always confirm with your lender what LTV ratio they offer before you apply. It directly relates to the amount you deposit as a down payment and the affordability of the overall loan amount when contemplating your purchase.