It's actually a lot less common with houses. If it weren't for the housing collapse of the last five years, no one would ever even know that you could be upside down on a home loan. Traditionally, you have always expected the price of a house to go up after you bought a house. No one ever used to expect that they could buy a house and have it fall in value. That's the kind of thing that happens to a car. You have always known that once you drive a car out of the dealership, it falls in value immediately. Over the next year or two, the value the car will fall to depreciation until soon, you'll find that you owe more on the car that you would get if you actually sold it at a used dealership. That's an upside down car loan situation.
This is a problem. An upside down car loan is a problem because should you total your car at some point, the insurance company will only pay you what your car is worth right now. They won't pay you enough that you could buy a new car.
This is a problem. An upside down car loan is a problem because should you total your car at some point, the insurance company will only pay you what your car is worth right now. They won't pay you enough that you could buy a new car.
