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What Is My Car Worth – And Why Do I Owe More?

What is My Car Worth – And Why Do I Owe More?

Did I Get a Good Deal on My Car? (I Thought I Did…)

Car owners are often shocked when they learn the actual value of their car when compared to their car loan. If you already have an auto loan, you may have done this research (and some math) and been unpleasantly surprised.

The blue book says one thing, the black book says another and my lender says I owe them a different – and higher – amount than either book. So what is my car really worth

If you are considering selling your car or refinancing it, your vehicle’s rate of depreciation and your loan term may hold the answer to what is going on with the value of your car.
what is my car worth and why is my car loan more than that amount

Vehicle Depreciation: A Fact of Life

Before proposing an answer to the question, why do I owe more than my car is worth, we need to discuss depreciation.

Vehicle depreciation describes the reduction in the value of a car due to several factors including demand and age. According to former Black Book Senior Vice President and Editorial Director, Ricky Beggs, car owners need to remember that their vehicles are depreciating all the time.


You may have heard the argument for buying a car two years or older that goes something like this, “The second you drive a new car off the lot, it’s worth such-and-such less than you paid for it.” This is true. reports in the first year, according to, a car can depreciate from three to up to almost 40 percent of it’s sticker price. Some makes and models fare better than others.

The luxury lease phenomenon is a good example of how the value of a vehicle is based on supply and demand. Since most luxury vehicles are leased, and most leases term around the three year mark flooding the market with these types of cars, a consumer looking for a used luxury vehicle can be choosey when car shopping because there is a plentiful supply.


Also, the expiration of various warranties (and onset of necessary vehicle repairs related to wear and tear) impacts vehicle depreciation. The demand for vehicles out of warranty is lower, lowering the value of the car.

Black Book Auto, a longtime industry go-to for car values, publishes a helpful report on vehicle values week-to-week.

Age – Beyond Wear and Tear

Age also impacts the value of a car. Many financial institutions stop offering auto loans on used cars around the five year mark. While some lenders will make exceptions, out of warranty and in low demand, generally these vehicles are ideal for cash buyers.

Innovative Funding Services may be able to secure an auto loan for you on your older, used vehicle. Find out!

While depreciation is the true culprit, it is often not something a car buyer can control. Avoiding the long term auto loan with little or no downpayment is.

The Impact of Little Down, Long Term Car Loans

Often times, in order to get into the car they want, buyers will extend their loan term out as far as 84 months – that’s seven years. Not only will that cost more in interest rates, but it also means due to depreciation, they may end up with negative equity – that’s “upside down” – in their car.

The car is worth less than what they owe on it.

“[The] rate of depreciation is a major factor in the monthly payment for everyone who finances their vehicle…” Beggs says. “For traditional finance, the overall price of cars has pushed the length of finance to longer terms in order to make the monthly payment more affordable.”

Is this you? If so, sometimes there you can roll a remaining loan balance into a new car loan. Just be careful. You could end up right where you started.

How To Evaluate the True Market Value of Your Car?

Unfortunately, what you owe on your car loan has nothing to do with the value of your car – not to anyone other than you, that is. But it is still good to know where you stand, so you can make informed decisions.

Beggs says, “In today’s industry, there is so much information and easy access to that information.” He points to the lenders as a resource for car buyers – and a little elbow grease at the keyboard. “Just using the technology to dig for public information will get you tons of market insight.”

Here’s a starting place: 5 Ways to Find the True Market Value.

Jennifer Bonessi

Jennifer is a blogging mom of three who loves her dusty minivan. "Its the closest thing to a spaceship I'll ever drive!" She writes for IFS and a variety of other niche publications.

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