Loan-to-value in plain words
Loan-to-value (LTV) is the loan amount as a share of the car's value. A higher LTV means a smaller down payment. Lenders set LTV by the car's age, make, your credit profile and their own policy, and they do not all publish it. That is why two people buying the same car can be offered different loan amounts. Treat any single percentage you read online as a rough guide, and ask the lender for the figure that applies to your car.
Worked example: price, valuation and down payment
An example, using round numbers and an assumed lender policy, to show how the pieces fit. This is an illustration, not an offer. Every lender sets its own share.
| Price agreed with the seller | ₹6,00,000 |
|---|---|
| Lender's valuation of the car | ₹5,50,000 |
| Lender finances 80% of the valuation (assumed) | ₹4,40,000 |
| Down payment you pay (price minus loan) | ₹1,60,000 |
| EMI at an example 12% over 4 years | ₹11,587 |
The loan is smaller than the price, because the valuation came in below it and the lender lends only a share of that. Add fees and insurance on top of the down payment to see the cash you need on the day. Change the numbers in the EMI calculator.
What else you pay from your own pocket
The down payment is not the only upfront cost. Add the processing fee, the valuation and documentation charges, the RC transfer fee, the first year's insurance if it is not funded, and a buffer for repairs and servicing, which matter more on an older car. Many first-time buyers find the true cash needed is higher than the down payment figure. Ask the lender for a total-cash-needed estimate, and see fees and charges.
How to lower your down payment, and why you may not want to
A bigger loan means a smaller down payment but a higher EMI and more interest. If the car is old and the tenure short, the EMI on a large loan can strain your monthly budget. A bigger down payment is the cheapest way to cut your total cost. Use the EMI calculator to see both sides before you decide.
Frequently asked questions
Can I get 100 per cent finance on a used car?
Rarely. Lenders usually finance a share of their valuation, so plan for a down payment. Ask the lender for the exact loan amount for your car before you pay the seller.
Is the down payment based on the price or the valuation?
The loan is based on the lower of the price and the lender's valuation, so the down payment is the price minus the loan. If the valuation is low, your down payment rises.
Does a bigger down payment lower the interest rate?
It can help your chances and reduce the total interest you pay. Some lenders also price better on a lower loan-to-value, but it varies, so ask.
KhatuLoans is not a lender and is not paid by the lenders named here to rank them. Rates, fees and eligibility change; always confirm with the lender. Read our editorial policy and how we make money.