Auto Loan Value

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What is auto loan value?

The world of auto loans is often full of jargon, most of which is never explained to us as consumers. When an avid reader contacted us in his confused state about auto loan value, we decided to dedicate some of our website to explaining what auto loan value is and how this can affect the amount of money an auto lender is willing to lend.


I recently contacted an online car loan company as I really needed a new car and just couldn't afford the car outright. The auto lender got back to me and said that they would only lend on 100% of the auto loan value which was $20,000 when the dealer was selling it for $23,000. I don't understand this at all. What is auto loan value and why should it be different to the dealer value placed on it?




For example:

Vehicle purchase price $23,000

Thank you so much for your email. Auto loans can certainly be confusing at times so let us answer your question for you.

When you walk into a dealership there will always be a sticker price on the window of each car. When you buy a used car through the classifieds or via an online car sales site there will be a price attached to it. But the prices quoted are not the auto loan value.

The auto loan value is the value that lenders will place on a car, and potentially the maximum amount of money they will offer to lend on.

How do they determine the auto loan value?

When someone requests a quote for an autoloan or submits an auto loan application lenders will refer to a variety of sources to determine just how much the car is worth on today's market. This is known as the auto loan value.

For a new car they will know just how much the car cost the dealer, in other words how much he had to pay the manufacturer before he added on his profit margin to the car. In your case the car cost the dealer $20,000 and this is the maximum amount they will loan on.

In the case of a used car, this is a bit trickier! Generally auto lenders will refer to used car valuation guides. Which one they use depends on which state you're in as some cars are worth more in different states. Once the value has been determined, the auto loan value will be set at this level. Even if you're buying it through a used car dealer or via a private sale for $2000 more, they will never loan against more than the auto loan value.

Down payment $1,000

Auto loan value $20,000

Maximum auto loan $20,000

Amount not covered $2,000

In summary it doesn't matter what price a dealer or a private seller places on a car. A car has a market value and an auto lender will only ever lend on that maximum, known as the auto loan value.