For a new car, the loan value is generally the same as the dealer invoice price or the manufacturer's suggested retail price, or MSRP, and the choice is up to the lender. With a used car, lenders often use such fair book value sources as Edmunds.com or Kelley Blue Book.
If the consumer is purchasing a new car and the loan is going to be more than 100 percent of the invoice or MSRP, the interest rate is likely to be higher than if the loan were for a smaller percentage of the car's value, or the consumer may have to make a down payment. Knowing the year, make, model, exterior and interior condition and any extra accessories makes it easier for the lender to determine the loan value.
If a used car is less than two years old, the lender may set the value in the same way he does with a new car, or a set percentage of that price, such as 80 percent. This has the potential to limit the amount that the consumer can borrow with the purchase of a used vehicle. Different lenders use different calculation methods, so it's important to talk to the lender beforehand and to shop the loan around if necessary.