Be Careful About Owing More on Your Car Than It’s Worth
How Could This Happen?
As strange as it sounds, it’s not that uncommon for car buyers to find themselves with a loan balance that is higher than their car is currently worth. If you took out a long-term loan on your car, it may be depreciating at a faster rate than you are paying it off. To be sure, you can check the current balance of your loan on your bill. Using Kelley Blue Book, you can look up the current market value of your vehicle. If it’s worth less than the loan balance, it’s a good idea to work on turning things around.
Why This Can Be a Problem
When your car is worth more than you owe on it, it’s an asset to you. You could sell it tomorrow (or trade it in) and make a profit, even after subtracting the remaining loan balance. However, when your car is worth less than you owe, it becomes a liability. Of course, while you’re still driving the car, these numbers can seem sort of irrelevant. The value of a car that you’re actively using is found in the fact that it’s serving its purpose of getting you around. The only time this can be a real issue is if the car is totaled or when you want to sell it. Gap insurance is one way to protect yourself from having to make residual payments on a totaled vehicle.
Get Yourself Out from Underwater
The term often used for this issue is called being “underwater in the loan.” For instance, if you still owe $13,000 on a car that is currently only worth $12,000, that means you’re $1,000 underwater in the loan. Getting yourself out of this situation is all about playing catching up. Making extra loan payments or working with the car dealership to rework the terms of your loan can help you improve your position. If you can pay the loan off at a faster rate, you can get ahead of your purchase once again, transforming it back from a liability into an asset.
If you can no longer afford your payments, or find yourself in need of a different style vehicle, we can help you. Brevard Value Motors offers a variety of creative solutions to help you get back on top. Visit us in person or give us a call: 321-749-1185
by Anastasia Climan – Content Creator at Half Full Marketing
Start Shopping Today @ BrevardValueMotors.com