What do you do when you owe more on your car than it’s worth?

Thousands of people are driving an “upside down” car, and it’s costing them big money. 

Car loans are considered “upside down” when the vehicle is worth less than the amount left on the loan.

How did so many people wind up owing more on their car than it’s worth?

“We had an era during the credit boom a couple of years ago where people were taking longer and longer loans.  They were taking six and seven year loans where the balances declined at a snails pace,“ explains BankRate.com’s Greg McBride.  “Couple that with the fact that at the same time many of those car buyers were not making down payments.“

You save the down payment and long term loans keep monthly payments lower, but you pay a higher price later.

The average car loan is still nearly five years and $19,000 at an average rate of 8.37% according to Experian Automotive.

Fortunately, it is possible to refinance a car loan.

Finding a low interest rate keeps payments lower, and can keep you from going upside down.

Consumer advocates say that when shopping you should keep loans to five years or less, buy cars that hold their value better and make some down payment. 

Also, buying a cheaper car and keeping it longer will keep from going upside down.