May 2011 2

How to Avoid Owing More Than Your Nissan is Worth

Like home loans, it’s not difficult to find yourself owing more on your car loan than your Nissan is worth. This is a problem if you hope to sell the car, because you won’t get as much as you have to pay to the lender – which means you have to pay the difference before you can get a new car or roll the balance onto your next car loan. Neither is an ideal solution. Here’s what you can do to avoid owing more for your Boston Nissan than it is worth.

Understanding Car Depreciation

A new car depreciates as much as 20 to 40% in the first couple years it’s driven. Many people choose the maximum length of time for car loans, which is generally 60 months, and/or obtain a car loan with a low down payment, which means they end up owing more on the loan than they could sell the car for a few months into buying.

Make a Larger Down Payment

One way to reduce the potential of owing more than the Nissan is worth is to buy the car with a larger down payment. The more you pay up front, the less you finance and the less interest you have to pay. If you buy a $20,000 car with a $3,000 down payment, you drive off the lot owing $17,000 and the car is worth $20,000.

Decrease the Term of the Loan

Instead of borrowing money for 60 months, choosing a lower repayment term makes your monthly payments higher. This will help you keep the amount you owe about even with what the car is worth over time, helping you avoid becoming upside down on your Nissan loan.