In the automotive financing industry, when you are in a situation where the amount of money you owe is greater than the actual market value of a vehicle’s worth, it means you are currently upside-down on your auto loan. Many fears this scenario to the point that they give up from getting an auto loan altogether.
Well if this is what stops you from getting a car loan, I cannot blame you, indeed being in this situation is a true pickle. You cannot lower your payment through refinancing, and selling your hard-earned property might not even cover the whole loan either.
To better understand this kind of issue, we need to find out how a car buyer or a current car owner gets themselves into this messy situation in the first place.
Believe it or not, a car’s value depreciates as soon as you leave the dealership’s lot. Upon purchase, a vehicle with a low or no down payment at all you already owe the financial institution the amount you pay for it, and the value of the vehicle in your possession is already worth less than it originally is.
If a person buying a vehicle for the first time, it is easy to overpay most especially if you did not do your homework and not research important details beforehand. Overpaying the intended amount does not make the vehicle anymore compared in the open market. So paying $20,000 for a vehicle that is now worth only $15,000, then congratulations! You are upside-down on your auto loan, on the spot.
You can also be upside-down on your auto loan when your car dealer takes advantage of you, employing a number of tried and tested tricks and practices designed to fool their customers ending up owing a whole lot of money more that should
When you add a lot of add-ons and extra package option during your vehicle purchase, you are only increasing the final total that you will ultimately pay, but it will not change the fact that is not going to affect the worth of the car. This is also a never miss and sure-fire ticket to being upside-down on your auto loan
Unless you are always on high alert and proactively aware of the things mentioned above during the time you buy a vehicle, may it be brand new or pre-owned, it is very easy to fall prey and be an unwilling victim of these heinous traps.
The truth is being upside-down on your auto loan is almost a certainty. 1 out of 4 people will get themselves upside-down on their auto loan. And in due time, caused by the economy’s status and what currently goes on in the open market, even those who were lucky enough not to fall victim to these pitfalls, will ultimately, at a certain point of their life, will be upside-down on their auto loans themselves. That is why even if people they know what causes them to go upside-down, they are unable to avoid it.