Trading in cars to soon (Kinda long)

This is from our local NBC affiliate (www.nbc5i.com)
Specifically because of this, I will have held on to my truck for three years after paying it off before my Prius comes in

New Car Buyers Driving To Financial Ruin

POSTED: 4:49 pm CDT May 25, 2004
UPDATED: 10:08 pm CDT May 25, 2004
DALLAS -- The status symbol many North Texans find in a new vehicle could prove to be fool's gold. The desire for a new car is leading some buyers down the road to serious financial problems.

About 40 percent of new car buyers are "upside down" on their previous vehicle loans, according to Edmunds.com. In other words, the buyers still owe more money on the vehicles they are trading in than the vehicles are worth.

J.D. Power and Associates reports that the average negative equity of new car buyers is about $2,200, which has doubled in the last four years.

Mark Eddins, of Friendly Chevrolet in Dallas, provided a local perspective.

Eddins said the number of people who owe more on their cars than market value will bear has tripled at his dealership.

Part of the problem, according to the experts, is that people continue increasing the time frames of car loans to buy a bigger, more expensive vehicle.

The average length of auto loans now is 63 months. The average in 1999 was 48 months. Some financial institutions offer loans up to 96 months, or eight years.

"With all of the incentives that all the manufacturers are pushing, it is really driving consumers to want to trade their vehicles earlier than they traditionally would have," Eddins said.

Trading in a car while still owning more than its trade-in value is one of the worst financial decisions an individual can make, according to credit exerts.

"That means you keep getting deeper and deeper into the hole and you never, ever go without a car payment," Bettye Banks, of the Consumer Credit Counseling Service, said. "They need to understand what they can reasonably afford and have some kind of plan for getting rid of the old debt first."

Bankrate.com offered some advice for avoiding negative equity on car loans. Try to make a 20 percent down payment and select the highest monthly payment and shortest loan terms you can afford. Most importantly, Banks said, keep a car until it's paid off.

"Just because there's something hot, fast and sassy out there doesn't mean you have to buy it," she said.

 

There's so many smart people on this site . If only the rest of the world was as sharp as the Prius community. Actually, that'd be a tad terryifying.