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Publish Date - December 31, 2018

Author: Greg Thibodeau

Categories:   Tips & Insights For Car Buying    Auto Loans & Financing   

Car Loan Value

Informed consumers should know the car loan value of any car they're considering purchasing. Determining car loan value is similar for both new and used cars. If you don't know a car's value, you can't expect to get the best possible loan.

Other Car Loan Value Terms

When dealing with a car loan you might hear other terms with the word "value" attached, besides car loan value. Other terms you might encounter include: loan value, retail value and book value. These terms all refer to a car's value but are called different names by car value assessing organizations. All the terms are used to assess your car for a loan and include the same basic components:

  • The car's make and model
  • The car's mileage and safety record
  • The car's transmission type
  • The car manufacturer's suggested retail price
  • A car's additional features like airbags, electronics and audio systems.

How to Determine Car Loan Value

There are several ways of determining car loan value. Usually when someone is talking about car loan value they're referring to used cars. There're three nationally recognized, widely used car valuation guides: NADA, Kelly Blue Book and Black Book. You can access all three car value guides online with no charge.

Which book is used to determine the value of your car is dependent on what part of the country you're in. Car values vary in each book and can vary from one geographic region to the next. Certain cars demand a higher price in certain regions. For example: four wheel drive cars are typically more popular in the south than in other areas of the U.S.; therefore, a car could have a higher value in Texas than in New York.

New Car Value and Car Loans

For new cars, research how much a dealer has to pay. That value is called an invoice price. NADA, Kelly Blue Book and Black Book all show dealer cost before any other car manufacturer discounts. Most car loan lenders consider true dealer cost as the basis for determining how much they will loan for a car.

For example, if dealer cost on a car is $25,000 and they sell the car for $27,500, a lender may approve a car loan for 100% of dealer cost or $25,000. The car loan lender uses dealer cost to determine the car loan value.

How much over dealer cost you pay usually affects how much down payment is required. That's another reason to go online and research your car and its value, so you can negotiate the best possible price!

Understanding car loan value will save you money in the long run, so do your research before applying for your loan!