How Upside Down are You on Your New Car and What Can You Do?

Let me first define what being “upside-down” means. The bottom line is that you owe more on the car than it is worth. 

This can be a vicious cycle for a lot of people. How does this happen? How do you stop it? Here are some ways to get out from under being upside-down:

• Choose wisely. Look into the “residual,” which is the projected, future resale value. Even though they may cost more up front, vehicles with higher residuals are less expensive to own in the long-term because they depreciate less. Purchase mainstream vehicles. A higher trim level four-door sedan in a fairly common color will hold onto its value more than a lime green sport model with excessive customization.

• Resist the urge to keep buying new cars on a regular basis. Take care of what you have and hang onto it. Pay it off. If you’ve taken care of it, then it will bring more money when you sell it or trade it in. And if you’ve paid it off, you will then have some positive, rather than negative, equity.  Fixing it up and spending a few Saturdays waiting by the phone can result in several thousand dollars in your pocket. If you don’t want the hassle, the dealership will be more than happy to take it in trade and make some good money on it.