Lots of Negative Equity

Well this super sale is dragging on, and on, and on...The best way to sum this sale up is that my dealership dropped the ball and didn't get me the inventory I need to do my job, and negative equity stinks if you're the one stuck with it. This whole sale has been about people 8, 9, and 10 grand flipped in their trades. By the way, flipped, buried, and upside down are all ways dealers describe negative equity in a customers trade.

If you're in this situation, it typically takes above average credit, or a large down payment to get out from under negative equity. The reason being, especially in today's economy, lenders just won't lend endless amounts of money based on the value of the new vehicle you're trying to purchase. I guess this is just a little heads up for those of you in this situation.

Really what this comes down to is customers overpaying for vehicles in the first place, and buying vehicles that tend to depriciate quicker than others. I personally lease if I'm going to buy new. I figure I'll always have a car payment, so why not drive a new vehicle every two years, and not worry about negative equity. A lot of people don't like to lease, because they think they are losing some ownership rights, but realistically, when you finance you don't "own" the vehicle until the last payments made anyway.

The average trade cycle is between 29 and 36 months, I guess we get bored easily here in America. My point is, please consider this before you get locked into an 84 month finance contract, most people will not keep a vehicle seven years, and that probably includes you too.

All the above is extremely important to keep in mind if you're buying new. Did you know a rough average for depriciation on new vehicles is 20-25% your first year, another 15-20% your second year and your third year is about 10-15%. OUCH!!! Buy right upfront and save yourself from the pain.

I really like CarsDirect buying service. They show you MSRP, invoice, their price, and they guarantee the lowest prices. You also don't have to work with car dealership salespeople. Try it out, I think you'll like it.

In the mean time...

Take care and beware,
J the Car Guy