Upside-down Car Loan
Do you have a car that you want to trade in? You might be in for a shock. It’s likely that the dealer will make a trade-in offer that’s anything but high-ball and not even ultra-low discount financing or a huge cash rebate on a new car can make up for it.
The blame is on used car prices going down.
Tom Kontos, a vice president at ADESA Corp., an auto auction and remarketing services company says, “The high new-car incentives have caused used car prices to go down.” Thus, when used car owners decide to sell, “they’re going to get an unexpectedly low price on the trade-in.”
The low prices on trade-ins won’t be welcomed, especially by the 40 per cent of new car shoppers whose old auto loans are upside-down car loans.
What are Upside-down Car Loans?
An upside-down car loan is a loan that exceeds the current value or resale price of the car. Simply stated, upside-down car loans happen when you owe more money on a new car than it’s really worth. Say, for example, you still owe $5,000 on a car loan and you decide to resell. You find out that the trade-in value is only around $3,000. Your car loan is therefore what is termed as an upside-down car loan.
Upside-down car loans have become quite common and many people find themselves in the same situation as you are now. About 38 per cent of those who are trading in their old cars owe more money on their trade-ins than the resale price. This is according to the Power Information Network, an affiliate of market researcher J.D. Power and Associates.
What causes to Loans to become Upside-down Car Loans?
Car value depreciation is one of the main culprits of upside-down car loans. When the car is depreciating faster than the purchaser is building equity, new car loans quickly become upside-down car loans.
What should you do when you have an Upside-down Car Loan?
When you in a situation where your new car loan becomes an upside-down car loan, the best thing you can do is hang on to your car and pay it off as quickly as possible. At this point, refinancing your upside-down car loan might be a good idea.
Refinancing is one of the best kept secrets in the auto financing industry. By refinancing your upside-down car loan, you can reverse the cost of your loan and save yourself from spending more than you’re willing to. With a low interest rate loan, you can refinance your upside-down car loan and lower down your monthly payments.
Car Loans
Car Loans
... People with good credit are not considered possible liabilities to the lending company. Bad credits are given high interest auto loans in order to offset the possible risks the lender will incur in loaning money. Those with good credit standing could expect low interest auto loans of between 2% to 15%. ...
... Aside from the variables that could contribute to the auto loan values you will receive. There are also a number of intangibles that could contribute to getting favorable auto loan values. You can have affordable auto loan values by having low interest rates. The most basic requirement for low interest ...
... or putting money into your savings account. Your savings deposit will help improve your credit score since this serves as your pool of funds in cases of emergency. Once your credit score improves, you will be granted low rate auto loans. Another way to have low rate auto loans is to pay a larger down ...
Lowest Auto Loan Interest Rates
... of getting a vehicle and you are not really in a hurry to buy one, then you have ample time in your hands to do some research. The time you spend to find the company that offers the lowest auto loan interest rates could be well worth your time. With enough time, you will also have the luxury to compare ...
... is no direct correlation between Federal Funds Rate and auto loan interest rates but it is a given fact that changes in short-term cost of money do affect the auto loan interest rates. Although short-term loans are affected by the higher Federal Funds Rate to a certain degree what actually fund these ...