How to Avoid Upside Down Auto Loans

At the risk of offending every car manufacturer on the planet, I'm here to tell you that buying a very expensive car makes absolutely no sense. There, I've said it.

Now I can hear you saying, "But an expensive car holds its value longer." My retort? Not really. Any car loses a lot of value the minute you drive it off the lot.

For an average car, that translates to 65% over 5 years. Even a Mercedes E350 loses 64% in the same period. So it makes no sense to apply for a longer car loan just so you can show off to the neighbors.

Given the rapid decline in a car's value, the longer the loan, the more chance you'll have of being upside down, meaning at some point you'll owe more than the car is worth.

So don't take a car loan that is longer than 48 months. And if you can't afford the monthly payments on a shorter loan, you can't afford that car.

We hope this article was helpful. But if you’d like to read more on this—or a closely related—subject, just click here.