In order to understand the loan value of a car, you first of all need to have a good working definition of it. One common misconception is that the loan value of a car is the same as the “book value” of the vehicle; however, that isn’t true. The loan value of a car is simply the amount that a bank is willing to lend you to purchase that car, and a lot of variable will go into determining it. How to determine the loan value of your used car? Read more for some of the most important steps to take:
Perform a full evaluation of the vehicle.
Keeping the year, make, and model of the car in mind, the next thing you need to do is to note characteristics such as the results of the latest emissions test, any options the car has, the mileage, and any maintenance records.
Know what type of title the vehicle has.
You will need to have a full understanding of the type of title the vehicle has. For example, even if the vehicle appears to be perfect, if it has a salvage title, that means it has either been in an accident or has been damaged in a natural disaster. Even if the vehicle has been thoroughly repaired, if it has a salvage title, that will have a negative impact on the loan value of your vehicle. On the other hand, if the vehicle has a “clear title” that means that it hasn’t been in any mishaps.
Understand the Overall Condition of the Vehicle
The next thing you will need to do is to be aware of the full overall condition of the car. You should note any mechanical issues and how the paint, taillights, and car parts look.
Be aware of the Loan-to-Value Ratio
Finally, even in the best of circumstances, realize that the Loan-to-Value (LTV) ratio that the bank places on your vehicle will usually only be 80 percent at most. Thus, if you are attempting to get a loan for a vehicle selling for $10,000, the bank will only loan you up to $8,000. The remainder of the price is your needed down payment.