‘Upside down’ is a term used for many purposes with relatively the same meaning. When something is upside down, it implies that things are not in the right way but in the wrong way. This term is also used in finance (auto finance) to identify a car loan which is higher than the value of the vehicle. Let’s see why upside down car loans are not good for you and how to get rid of it.
There are number of cases where consumers being the victims of upside down deals and it has increased dramatically over the last five years. If the United Sates alone considered, about forty percent of consumers have become upside down currently. This simply means that forty percent of people who brought goods and services are paying more money then the worth of these goods and services.
There are many reasons for becoming victims of upside down deals. The number one mistake upside down consumers have done is being emotional at the time of purchase. Buying goods with emotional impulses may result buying something by paying twice as much as money the goods originally worth. This is more common among the car deals as many of the deals are done with emotional influence such as buying wife’s favorite car for her birthday etc. Another way this can happen is that some car dealers offer car deals for a very low down payment or no down payment, but with a long term lease. This lease may go up to seven years and end of seven years, the consumer end up paying a lot of money than the car’s worth. When the depreciation of the car is combined with the long term lease, it becomes an absolute upside down.
Whenever you afford a new car, you absolutely make sure that the deal is not upside down. Otherwise you will end up being one of the victims of the 40% who is paying as upside down. Getting into an upside down car deal is like a merry-go-round. You first buy a car and the deal is upside down. Then you try to sell the car down the line and the car cannot be sold for the price that you pay, so you end up selling it to a lower price. Since you need to close the lease by the time you sell the car, you take a personal loan to pay what you owe. Eventually, you end up paying a loan (with interest) that you took for a car that you no longer own.
The best advice for a victim of an upside down car loan is to stick with the car until the end of the payments and pay everything in full as agreed at the beginning.