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Every day, I get at least one e-mail from a reader who is stuck with a vehicle, owing more
than it is worth -- a situation known as being "upside down" on the loan.
I expect the volume of such complaints to pick up.
The main reason is that after more than 10 years of trucks, SUVs and minivans being the top-sellers
in the U.S. market, the ride has come to an abrupt halt.
Now, buyers who took out six- and seven-year loans to buy big pickups and SUVs in the last few years
are in even more dire straits than they normally would be with such long-term obligations.
The value of used trucks and SUVs has plummeted, making owners of those vehicles even more upside down.
How far have values fallen?
From a year ago, wholesale values of used trucks and SUVs have dropped more than 20 percent. That
means a 2003 Chevy Tahoe, valued last year as high as $15,000, now would be lucky to bring in $12,000.
As gas prices continue to rise, the values will drop even more.
Dealers say they see a lot of customers coming to their lots seeking more fuel-efficient vehicles
but owing as much as $10,000 more than their current SUV is worth.
Even with the most liberal of financing, it's impossible to roll that much negative equity into the
purchase of a $20,000 Toyota Camry. Nor should someone do that, even if the dealer offered.
So what should you do if you're upside down on a gas guzzler?
It sounds simple and doesn't alleviate the pain at the pump, but the best advice is to hang onto that
SUV or pickup until it's either paid for or the loan balance falls to equal with the value.
It's also a bad idea to simply walk away from the gas guzzler and let the bank or finance company take
it. Aside from the damage to your credit rating, the bank will wholesale the vehicle in a market where they are likely
to get very little for it. Then the bank will come after you for the balance, which is likely to be substantial.
If you keep the gas guzzler, you can minimize the cost of keeping it fueled by consolidating trips,
keeping your tires properly inflated and emptying the vehicle of any cargo you may be lugging around -- as little as
50 pounds can diminish fuel economy.
Also, change your driving style to one that involves fewer abrupt starts and stops.
But overall, try not to dig yourself into an even deeper hole by trading worries over high fuel bills
for significant financial hardship.
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