Finance Cars to Avoid Going Upside Down in Your Loan
by Bruce Sheridan
Getting the right kind of financing on your car is a critical part of the car buying process. You have to make sure you finance cheap cars that you can afford in the long run, not just the cars you would like to drive the most. Getting an unaffordable car loan is not a situation you want to be in, and it could put you upside down in your financing.
Many people look at the loan length and see that if they extend it as long as possible, it will shrink their monthly payment. They then make the mistake of thinking that getting the longest loan possible is the way to get the most affordable new cars, but in the long run it really isn't.
You actually get charged much more total over the entire length of the loan, and the lower payments mean you will owe more for the first few years of the loan. this could put you in danger of being upside down in your loan.
New cars depreciate in value as soon as you put that first mile on them. If you do not put down a big enough down payment, you could actually end up owing more money on the car than it is worth. This is called being upside down in your loan.
This becomes a big problem if you want to sell or trade in this car for whatever reason. You could end up holding the short straw and losing out on the difference in value.
To avoid this, it is always a good idea to only finance cars you can realistically afford, and to put down as big a down payment as possible. Making the loan length shorter is also a good idea, even though it will make your monthly payments substantially higher. It will also mean you will own the car sooner and not be in danger of being upside down.
Many people look at the loan length and see that if they extend it as long as possible, it will shrink their monthly payment. They then make the mistake of thinking that getting the longest loan possible is the way to get the most affordable new cars, but in the long run it really isn't.
You actually get charged much more total over the entire length of the loan, and the lower payments mean you will owe more for the first few years of the loan. this could put you in danger of being upside down in your loan.
New cars depreciate in value as soon as you put that first mile on them. If you do not put down a big enough down payment, you could actually end up owing more money on the car than it is worth. This is called being upside down in your loan.
This becomes a big problem if you want to sell or trade in this car for whatever reason. You could end up holding the short straw and losing out on the difference in value.
To avoid this, it is always a good idea to only finance cars you can realistically afford, and to put down as big a down payment as possible. Making the loan length shorter is also a good idea, even though it will make your monthly payments substantially higher. It will also mean you will own the car sooner and not be in danger of being upside down.
