SIGN IN YOUR ACCOUNT TO HAVE ACCESS TO DIFFERENT FEATURES

FORGOT YOUR PASSWORD?

FORGOT YOUR DETAILS?

AAH, WAIT, I REMEMBER NOW!

Total Integration Fitness

Total Integration Fitness

Training the WHOLE you.

T (662) 574-3368
Email: Tony@totalintegrationfitness.com

Total Integration Fitness
Jacksonville, FL US

Open in Google Maps
QUESTIONS? CALL: 0900 800 900
  • LOGIN
  • Home
  • Our Services
    • Financial Coaching
    • Fitness Coaching
  • Blog & Stories
  • Videos & Media
  • Contact Us
FREEQUOTE
  • Home
  • Auto
  • How to Avoid Going “Underwater” in your Vehicle….Loan
July 2, 2022

How to Avoid Going “Underwater” in your Vehicle….Loan

How to Avoid Going “Underwater” in your Vehicle….Loan

by Tony Carter / Thursday, 31 October 2019 / Published in Auto, Business, Finance

In a previous post, we spoke about ways to get out of an “underwater” car loan.

In this post, we will discuss a few ways to avoid getting into an “underwater” situation in the first place.

 

When you become interested in purchasing a vehicle, the first step you should make is to check your credit. This will help you determine what interest rate you may qualify for. You want to shoot for an optimal rate. If you have a credit score over 720, this will put you in a better tier and you could expect to pay a rate of 3.724% or less. Consumers whose credit scores are sub 720 can expect to pay an average of 5.098% or higher according to creditdonkey.com. A high interest rate is almost a sure fire way to end up underwater in your auto loan. Check with your local credit union or bank, as they will often have rates and terms that will match or beat the terms of a dealership.

 

Do your research! Shop around. Check out what the average selling price is of the car(s) that you are interested in to ensure you get a decent deal. KelleyBlueBook, TrueCar, and Cargurus can help with this.  This will help you know what to expect when you walk on a dealer’s lot.

 

Factor In Depreciation. Cars are depreciating assets, but some cars depreciate faster than others. You want to purchase a car that doesn’t depreciate at a fast rate to ensure that as you pay the balance down on the loan, the value will be in line with it.

 

(*There will be a future post on vehicles that you may want to avoid purchasing due to rapid depreciation.)

 

Make a down payment. This will immediately cut down the loan balance and help you get ahead of the depreciation curve.

 

You don’t need the “add-ons”. When you are finalizing your auto purchase and signing the paperwork, you will be offered myriad of upgrades, warranties, protections, and insurances. Most of these you will not need. I am not totally opposed to some of these items, but keep in mind that they will increase the cost of your vehicle and loan balance. It will be enticing because stretched out over the term of the loan will minimally increase your monthly payment.

 

The shorter the loan term, the better.  Don’t be tempted to extend the term of your loan over a longer period of time in order the get a lower payment. This is very enticing, but it is accompanied by a higher interest rate. This will prohibit the loan principal from being paid down as fast; therefore, leaving you with a higher risk of ending up underwater.

 

Buy used vs. new- Cars depreciate the most in the first two years. Consider purchasing a 1-2 year preowned certified vehicle. It will be less expensive than purchasing a new one, and it will have absorbed the largest depreciation hits already.

porsche

Avoid taking on the balance of your trade-in on your “new” car.  If you are already underwater in a car and decide to trade it in on another vehicle, that balance has to go somewhere. It gets added into the cost of the vehicle you are purchasing. When you bring negative equity into a new loan, you are burying yourself in the loan from the start. Make sure to start off on the right foot.

 

Good luck on your next vehicle purchase!

above water car2

  • Tweet
Tagged under: auto, auto loan, car, finance, personal finance

About Tony Carter

What you can read next

Interview with an Entrepreneur…
Business School with Jay-Z
When is the Best Time of Year to Buy a Car???

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Recent Posts

  • What’s a Legacy Drawer? Why you should have one and what to keep in it.

    What’s a Legacy Drawer? Simply put, it is...
  • 5 Tips to Help You Save Money

    Have you had trouble saving money or are having...
  • What is a Financial Coach?

    What exactly is a financial coach and what exac...
  • 5 Precautions to Take when Returning to the Gym after Covid-19 Quarantine

    At the time of writing this, things are looseni...
  • Blurred Lines- 5 Tips for Working from Home

    A few years ago, the singer, Robin Thicke came ...

Recent Comments

    Categories

    • Auto
    • Business
    • Finance
    • Fitness
    • Health
    • Interview
    • Parenthood
    • personal finance
    • real estate
    • Uncategorized
    • video

    Recent Posts

    • What’s a Legacy Drawer? Why you should have one and what to keep in it.

      What’s a Legacy Drawer? Simply put, it is...
    • 5 Tips to Help You Save Money

      Have you had trouble saving money or are having...
    • What is a Financial Coach?

      What exactly is a financial coach and what exac...
    • 5 Precautions to Take when Returning to the Gym after Covid-19 Quarantine

      At the time of writing this, things are looseni...
    • Blurred Lines- 5 Tips for Working from Home

      A few years ago, the singer, Robin Thicke came ...

    GET IN TOUCH

    T: 662-574-3368
    Email: Tony@totalintegrationfitness.com

    T.A. Carter Enterprises, LLC
    Jacksonville, FL

    • GET SOCIAL
    Total Integration Fitness

    © 2015 T.A. Carter Enterprises, LLC | Designed by Style The Word.

    TOP