Would you put your money into an investment that goes down in value faster than it builds equity? It doesn’t make sense, does it? That’s exactly what some of us do when we buy anew car and we owe more on our current vehicle than it’s worth. In this scenario, you’re paying the difference of your current car’s value and often it gets tacked on to the new car purchase. No matter how you do the math, you car is depreciating faster than you can pay off the loan and you won’t recieve more than the present value of the car as a trade in. That’s a problem. That problem is called an upside down loan. Experts at Edmunds.com say that 38 percent of car loans are involved in an upside down loan status.If you go to a dealer to buy a different car, you are in the hole with the present value of the car and what you owe on the loan. Lets say you paid $22,000 for the car, and you owe $20,500. The car is worth 18,000 at trade-in. Driving the expensive car has cost you an extra $2,500 in depreciation not to mention the gas at $100 a month, and interest on the loan. What are your options?There are several ways to solve the problem of an upside down car loan. The object is to pay off the $2,500 without having it tacked on to your new car loan. Buying a less expensive car will help offset the cost, and putting down an extra $2,500 will take care of the depreciated value, but you’re still not coming out on top of the deal.*Negotiate the price. Offer the dealership a little less than the invoice price and don’t be concerned that you are taking advantage because the salesman will start the negotiation way above the invoice price if he makes the first offer. When the negotiation is over, you’ll end up with a good price on your loan and that will help offset the $2,500 depreciation.*Buy a car with a rebate and offset the cost. Ask the sales person upfront if the rebate is taxed, and know the sales tax figure in your state. If the rebate is not taxed, you’ll save a few hundred dollars on the deal.*Be prepared by knowing which car you want to buy and have some quotes available from other dealers. Some people may feel intimidated in negotiating, but for an hours worth of bargaining you could save between $1500 and $3000 say the experts at Edmunds.com. If you’re still nervous, negotiate a car price online. By taking the personalities out of the negotiation, you’ll feel stronger and more confident.*If you know you’ll trade in your car ahead of time, take advantage of refinancing your auto loan before you’re ready to trade. As the feds lower rates, you can save money by refinancing. Even if you decide to keep the car, you’ll benefit by lower rates.Know the costs of registration fees, document fees, and sales tax so you won’t be surprised at the conclusion of negotiation. If you see other fees beyond those three, don’t sign on the dotted line because they are “extra fees.”To avoid falling into the upside down loan pit again, when you by a new car, don’t buy a car that is priced above 50 percent of your annual salary. Car dealers know you’re going to lose on depreciation, and you’ll be paying the loan cost plus the price of owning the car in insurance, fuel, and maintenance costs. That’s a big drain on your budget.It takes some time and effort, but you can offset the upside down loan if you are willing to do your homework and negotiate a lower price for your new car. Using these tips, you should be benefit by current lower interest rates, but don’t finance through your car dealer. He’s in it to make a profit and you’re too savvy for a high interest loan. Category:Home › Autos • Will the trend toward economy-size car models lead Americans back to buying smaller-sized cars? — part 2 • You should never use after-market auto parts when maintaining or fixing your car • Should a new car be rust-proofed? • Will the trend toward economy-size car models lead Americans back to buying smaller-sized cars? — part 1 • Five safest cars in North America • How to ensure your teen drives safely after getting a license • Pros and cons of using an hydrogen generator for your car • DIY automotive maintenance: How to change the oil