Financing has its benefits and drawbacks.
The primary benefit of financing is that you can drive home with a car that you couldn't afford to buy straight-out, so to speak. The price of the car is divvied up over a term, and a bit of interest is sprinkled in as well.
A major drawback of financing is the fact that most cars are depreciating assets. You may get to a point that, with the mileage or overall condition of the car, your payments outweigh the car's current value. This is an awful predicament to get into.
That being said, there are some ways out. Here a couple of things you can do when you owe more on your car than it's worth.
Flee to Morocco
If the amount you owe on your car is so drastic, you may find it to be more profitable to get out of the country. Move yourself and your car to Morocco, a country famous for not having an extradition treaty with the United States.
With you and your car safe and sound in the beautiful nation of Morocco, the financing company cannot touch you or the car. What could possibly go wrong with such an excellent idea?
OK, that's obviously not the most sound advice. On to more realistic choices...
Cut Your Losses
If you are looking to purchase a new car, the best thing you can do with your old one is to just cut your losses. Don't bother with "we'll pay off your trade-in" deals, because that will put you back into a cycle of owing more than a car's true value.
When you're in the market for a new car, sell your old one. Take the proceeds from the sale and use it to pay off the loan.
If you are financing any everyday car, it's going to depreciate. You will, most likely, get to a point where you owe more on it than its worth. When financing a car, you should plan ahead for its future sale and payment of its loan. By doing this, you aren't caught with your pants down when such an event happens.
Keep the Car Until It's Paid Off
The easiest route to take is to simply keep your car until it's paid off. It is important to know that depreciation happens to literally every purchasable product and to accept that when you go into taking a loan against anything.
Financing your car, and paying off the loan consistently, is the safest and most sensible route to go.
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