A low- or no-down payment, a longer-term loan, and a vehicle that rapidly depreciates in value in the first 2 years can cause you to be “upside down” in your car loan. The term means you owe more for the car than it is worth. It’s not unusual for a buyer to be upside down in a car loan a couple of years into a five- or six-year loan.

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Consumer experts recommend making a down payment of 20% or more and financing for no longer than four years to avoid being upside down. Not everyone can do this. Some alternatives:

• Don’t finance a car for more months than you think you want to own it
• Make the biggest down payment you can
• Choose a shorter-term loan if possible
• Buy a vehicle that will hold its value longer

If you find that you’re upside down in a loan, experts advise holding onto the car as long as you can--at least until the amount left on the loan matches the car’s trade-in value. If you need to get rid of it, try selling it yourself or consider bundling the negative equity from the car with a loan on a new car. If possible, accelerate your loan payments to avoid being upside down in your new loan. Contact any APGFCU Member Service Representitive for more information.