Ok, so you�ve found your dream car at the dealer, did the test drive, and sat down to crunch out the deal, just find that the trade-in value of your car was $2,000 less than the balance of the payoff of your current loan. When you owe more on your car to your current lender then your car is worth, that is what it means to be upside down. Or simply put� an upside-down car loan is a loan that exceeds the current value (trade in or resale) price of the car.

When the value of your car is depreciating faster than you are building equity, car loans go upside down. When you increase the term of your loan in order to decrease your monthly payment, the check you send each month to your lender may initially cover more interest than principal, especially when the loan term is five years or more.

If you are in this situation, we suggest following options.

• Find out the retail value of your auto, and then sell it yourself online through The Auto Dealer and our exclusive Interactive Magazine.
• You can keep your auto and pay it off as quickly as possible, by including an extra amount in the monthly payment.
• You could refinance your auto at a lower interest rate, keeping your monthly payments the same, this will pay down the loan principal faster.
• If you can afford to, speed things up even more by shortening the term of the loan and increasing your monthly payment.

The Auto Dealer can help you to investigate all of your refinancing options with by selecting any of our many solutions found in our �Finance Smart� Consumers Guide!