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   Car Values Drop As Loan Amounts Stay High

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Car Values Drop As Loan Amounts Stay High

courtesy of Myvesta, a Rockville, Md.-based credit counseling service

With the average new car sticker price at almost $30,000, consumers are taking out larger loans to cover their appetites for larger cars. As a result some people are finding it harder to make their payments each month and they are finding themselves without options to unload the car without taking a loss.

"As soon as you drive your new car off the lot it's worth a lot less than the loan you just signed," said Steve Rhode, president and co-founder of Myvesta, a nonprofit financial management organization. "As a result, many people who are having trouble making their payments are upside down on their loans and canít sell the car or trade it in without still owing thousands of dollars."

When a consumer is "upside down" on an auto loan it means that the amount they owe on the loan is more than the actual value of the vehicle.

"Over the past few years dealers have been luring in buyers with incentives such as zero percent financing and longer loan terms," Rhode said. "As a result of these tactics, dealers haven't been coming down on the total price of their cars as much, and consumers are owing more on their vehicles for longer periods of times. We've recently seen advertisements for 94-month auto financing.

Rhode recommends these tips if you are upside down on an auto loan and having trouble making the payments:

  • Find someone to make your payments. Instead of selling the car or trading it in, see if your lender will allow someone else to take over your loan.
  • Consider refinancing if you are having trouble making payments. A lower rate or longer term may make your monthly payments more affordable.
  • Negotiate with your lender to forgive all or part of the difference of your loan if you can make a lump sum payment after the sale of your vehicle.
If you are having trouble keeping up with your car payments, read the Myvesta.org publication "When You Can't Make Your Vehicle Payments." It can be downloaded free from http://Myvesta.org, or for a printed copy send $5 to Car Payments Publication, Myvesta.org, P.O. Box 8587, Gaithersburg, MD, 20898-8587.

You may also sign-up for Myvesta's email "DebtBytes" newsletter by clicking here. It's FREE.


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This story was published on September 18, 2003.
  
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