What Does It Mean To Be ‘Up-Side Down’ In Your Car Trade In?

It’s when you owe more on the auto than it’s worth.

A dealer could offer you $12,000 for your trade in. But if you owe $13,000 on it, well, you’re still going to have to come up with that extra $1,000 to pay your lender. This is called being ‘up-side down’ in your automobile.

The BuyingAdvice Team discovered that many people receive this awful shock when they attempt to trade in their vehicle.

This often happens to people who purchase with a small down payment (less than 20%), have a long auto loan term (more than 4 years) and/or bought a vehicle that doesn’t hold its value well (meaning it has a poor residual value: depreciates more than 30% the first year).

If you find yourself in this situation, you may want to hold off altogether on buying a new auto. You can receive an estimate of your auto’s value at Kelley Blue Book.

We suggest checking to see if you have GAP insurance, credit disability, and/or life insurance wrapped into your auto loan. If you do, canceling these policies will reduce the amount you owe to the lender.

Another tip: If you truly need to buy a new car, check to see which manufacturers are offering cash rebates – you can use this money to settle on your old auto loan.


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