Negative Equity Auto Loans – Being Upside Down – 10 Steps To Avoid Being In The Red

Negative equity auto loans are common place today. Being upside-down in your car loan refers to the situation in which a car buyer owes more on the vehicle than what it is worth.

The major reasons for this are...

• Little or no down payment.
• Long term financing - 48 months or more.
• Rolling over a balance from a previous car loan that was upside down.

All of these factors can help contribute to a negative equity auto loan. If you are upside down - don't give up! There are some things you can do to turn your financial situation around.

Enough talk about being upside down. Let's move on to the 10 steps to avoiding being in the red and making your next car experience more pleasant and positive.

10 Steps To Avoid Being Upside Down On Your Car Loan

1. Don't buy a new car

   Yes, you read correctly! Even though I sell a lot of new cars it isn't always the best thing to do if you have a negative equity auto loan.

   New vehicles depreciate anywhere from 20-50% of their value in the first few months you drive them.

   Leasing used to be the way to buy a new car. However, with the recent changes in banking and leases we need to take a look at each individuals needs and wants to see if it makes sense to lease.
   
   Leases are costing more today than they did at the first of the year.

2. Finance for 48 months or less

   Just because banks are offering 96 month financing - that's not what you want to do! Your vehicle is depreciating faster than you can pay it off.

   It may not always be possible to finance for 48 months. Then do the next best which is to finance for 60 months.

3. Put more money down

   This may not always be possible either. Start saving money before you intend to buy your next vehicle.
   
   Save enough to pay for your taxes, license and title - no sense in paying tax on those fees too.

4. Buy a vehicle that has a high resell value
   
   I know you like the new "lime green" Mustang with the 5-speed. However, not everyone likes, lime green, the two seater and enjoys shifting all the time. You'll have a more difficult time when you go to trade it in.
   
   It's cars like that where you'll find yourself in a negative equity auto loan.
   
   
5. Buy a cheaper vehicle
   
   A car that has 10,000 - 20,000 more miles, or a year older, can save you a substantial amount of money. If you don't put a lot of miles on your vehicle this won't make any difference to you in the future.
   
   It can save you money today!
   
   
6. Understand your car loan
   
   Negative equity auto loans dont disappear by magic! It may look like the dealer made your negative equity go away when you buy you next car...
   
   Don't be fooled. You are paying for it in your next loan.
   
   Customers are often surprised to find that their new or used car is costing them more than they thought.
   
   
7. Make extra payments
   
   There are times when this may not be possible. However, if you can make an extra $50 to $75 a month payment you can save yourself a lot of interest on your loan and pay it off early.
   
   Double up on your monthly payment is even better yet! Or, pay by-weekly on your loan.
   
   Doing any of the above can put you in a more positive equity position on your vehicle.
   
   
8. Get the most amount for your trade
   
   Do your homework. Go on line and get an idea of what your vehicle is worth to make sure you are getting the most for your car.
   
   Selling your car yourself will usually get you more money than if you traded it in at a dealer.
   
   See my consignment program to learn how you can get more money for your car without having the hassle of selling it yourself.
   
   
9. Don't buy more car than what you can afford
   
   Buying a car is an emotional buying experience. Sometimes our emotions and excitement are bigger than what are budget is.
   
   It's easy to get excited about that shiny new car and all the features and new technology.
   
   Is it really worth strapping yourself to a bigger car payment for the next 5, 6 or 7 years?
   
   
10. Fix any credit problems you have - get a better interest rate
    
    We have a special department that works with sub prime auto loans and it is common to see contracts with APR's as high as 23.99%.

I've seen loans where the finance charge was 80% of the total financed amount. That means if your loan was for $10,000, then the finance charge would be $8,000.

No sense in paying all that interest to the bank. Get your credit in order so you can get a better rate and stay out of a negative equity auto loan.

Learn more about how to get out of an upside down loan with negative equity. Discover 3 easy steps you can take right now to start getting back on track.

Following the above suggestions can keep you in a more positive equity position on your vehicle and out of a negative equity auto loan.

Learn more about Gap Insurance which is a program to stop loss against negative equity and can help prevent you from being upside down on your vehicle.

If you have any questions, or are upside down on your present vehicle and would like to know how to get out of it, please contact me.

I'll be more than happy to talk with you and see what your best options are for getting you into your cool car and out of your old one.

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