The average loan-to-value (LTV) ratio for used car loan originations is steadily creeping up across all lender types including banks, captive financiers, credit unions and independent lenders, according to the latest Q2 Credit Industry Insights Report from TransUnion.
Why it matters: The loan-to-value ratio (the total loan amount divided by the vehicle’s market value) is a key metric that signals how much risk lenders and car dealers are taking on. When LTVs soar, it can lead to tougher loan approvals, and a greater chance of losses for all parties if things go wrong.
By the numbers:
In Q2 2022, just 38% of used vehicle loans carried LTV ratios above 120%—meaning buyers owe nearly 20% more than the car's worth at origination. By Q2 2025, that jumped to 53%.
And used car loans above 140% LTV nearly doubled from 17% to 31% over the same period.
Independent finance companies now average 139% LTV on used-car loans.
Meanwhile, credit unions hit 128%, and banks/captives reached 115%.
Via TransUnion
Worth noting: The spread in the average used LTV ratio between independent lenders/credit unions vs. banks/captives has steadily increased since Q2 2022.
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The problem: High LTV ratios (100%+) put buyers in a vulnerable financial position, often leading to prolonged debt and limited financial flexibility.
For example: With elevated LTVs, vehicle depreciation often outpaces loan paydown, especially if loan terms extend beyond 72 months.
And the longer it takes to pay down the principal, the longer the loan balance exceeds the car’s declining value, deepening negative equity.
This reality creates a feedback loop where consumers roll over debt, inflating new amounts which, in turn, inflate LTVs.
And it also makes refinancing difficult, as lenders are cautious about loans without sufficient collateral, limiting borrowers’ ability to secure lower rates.
Between the lines: As LTVs rise, delinquencies often follow. But if the borrow defaults and the lender has to repossess the vehicle and sell it, the lender may have to charge off the difference between the amount financed and the cash value of the vehicle.
Big picture: To protect their future business, more dealers are working closer with lenders to ensure loans are structured responsibly with balanced down payments, reasonable loan terms, and LTV ratios that don’t overextend buyers.
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