Is your auto worth more than your loan balance?
Is your auto worth less than the loan balance you have to repay on it? If so, you are “upside down” in the world of the auto trade. And that’s not a good place to be.
Unfortunately, that situation has become more common as consumers sought longer-term loans in order to get their monthly payments down to an affordable level. Loans of up to seven years-that’s 84 months.-are now being offered to some buyers.
The average length of a new car loan from an auto finance company was 63.1 months in April 2008, up from 53.8 months in April 2000, according to the Federal Reserve’s report on consumer credit.
To stay upright, try to limit an auto loan to the number of years you plan to own the vehicle.