Don’t overpay. If you’re upside down on a car loan, or underwater, it means the value of your car loan is greater than your car’s overall value. Leasing a new vehicle can potentially be the perfect solution to getting rid of an upside-down car loan if you need to get behind the wheel of a different vehicle as soon as possible. A few years later it might only be worth $15,000. Being upside down on a car loan means having no trade value to use in buying or leasing another car. So, if your car’s worth $10,000 but your loan balance is $12,000, then you’re $2,000 upside-down. Owing more than the vehicle's value on a car loan is known as being "upside down" or "underwater." The gap between the car's value and the amount owed is called "negative equity." An upside down car loan is much more common than most people realize.The nature of car purchasing, depreciation and sales tactics at dealerships often lead to people who are upside down in a car loan, meaning they own more money on the loan that the vehicle is worth. [ RELATED: Pros and Cons of Leasing vs Buying a Car] Leasing with an upside-down car loan.

A common workaround is to roll the remaining balance on your old car loan into the loan for the new car. Bogus fees, seductive extras and savvy dealers make it easy to overpay for a car. On the downside, it’s easy to get caught out by one or more of the following: rapid depreciation in your car’s value; a small down payment; too long of a loan; a rollover loan; overpaying for the car, or add-ons bumping up the price. Loans go upside down when the item you buy loses value faster than the loan balance decreases. If you don’t budget correctly and finance your new car properly, you may find yourself in a potentially damaging financial situation where you end up with an upside down car loan. For example, if you still owe $10,000 in interest and principal payments on your car, but your car is only worth $6,000 on resale value, you are upside down on your car loan. If you owe more than $15,000 on the loan, you have an upside-down loan. Getting Your Car Loan Right-Side Up.
Instead of having positive equity in your car, you have negative equity.

Avoid an upside-down car loan. 1. Upside-down loans can result from paying too much for a new vehicle, paying little or no down payment, having a very long loan term (72 months or more), having a high interest rate (possibly as result of bad credit), buying a high-depreciation car make/model, or rolling over a balance from a previous car loan that was also upside down. Being upside down on a car loan, when you owe more than the vehicle is worth, is a common problem for vehicle owners. An upside-down car loan occurs when you owe more on your loan than your car is worth. That can be a costly decision, as it effectively increases the cost of your new car. For example, a brand new car might cost $25,000. Being upside down on your auto loan isn’t always the easiest situation to get out of, but it certainly is possible. Down Payment When you purchase a vehicle with a loan, this represents the money you pay at the beginning of the financial agreement to lower the total amount you finance. In fact, it means you must somehow pay off the remainder of your loan after a dealer gives you credit for the value of your trade vehicle. With a little research and a plan, you can take the necessary steps to not only keep your car, but also save your credit and bank account. Interest Rate (APR) When you purchase a vehicle with a loan, this is the percentage dollar amount that determines the …


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