“Upside Down” Loans: Understanding Negative Equity in Car Financing

“Upside Down” is a term frequently Googled by car buyers and owners, referring to the situation where a person owes more on their car loan than the vehicle is worth. This is also known as having negative equity. It’s a common scenario in the auto industry, especially for buyers who finance their vehicles with long loan terms or small down payments.

Being upside down on your car loan can be a risky position, particularly if you plan to sell or trade-in your vehicle. It can lead to a cycle of debt, where the negative equity is rolled into a new car loan, further increasing the amount owed.

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