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It is bad enough in a car accident resulting in a total loss, but to insult, to add injury is not an insurance company that pays its two years old car is only 40% of its original value, and then his cap financial institution said that after two years, the payments that barely a dent on your loan.

The result? You will receive a check for $ 10,800 from his insurance company, a car in the amount of $ 22,000 to be paid. Welcome to the danger zone for car loans.

And then ask yourself: "But how can that be?" To help you, we will see for the first time in his car, has lost much of their value so quickly.

All mechanical values such as cars, boats, and his reaction, it loses value over time, and some much faster than others.

The loss of value is called depreciation, and in this case is the speed with which a given model loses its value from the confidence of consumers, more than any other factor determined. Among the top 10 fastest cars depreciation for the year 2008, the treatment of the three most common reasons for dissatisfaction were poor owner, a mechanical failure and lack of comfort.

The solution to this problem is to buy a vehicle with a high residual value. Is this a new vehicle you are looking for, you see the auto-finance leaders, but the recognized authority on residual value forecasting of new automobiles. A residual value of around 50% at 5 years is very good. In addition, the fastest cars residual values have depreciated in the range of only 20% lower after 5 years.

If you are in the market for a used car, you avoid the cars in the annual list of top 10 fastest cars and you devaluation consult the Kelley Blue Book for the current price of the vehicle, which appear to be considered. Be on the lookout for is a large gap between the Blue Book price of the car and asked the dealer or private party.

The aim is to keep the gap between what the dollar value of the vehicle and the loan balance from getting too far apart.

The second action you can take to the chances of a potential financial disaster loans have a duration as short as possible to reduce it. Of course, if this is not as easy as it seems, to financial institutions would be no market for car loans 5 years. Although a loan of 5 years or more to the budget of many car buyers do not start building a substantial amount of capital to nearly two years on the loan.

No matter how good an agreement on a new or used vehicle, which goes to the depreciation, while your loan balance remains essentially unchanged for at least the first 16 months of a loan of 5 years. The difference between the two amounts is is what you would be personally responsible if you stood your car for any reason.

In most cases this amount to $ 6048 on the basis of an average car payment of $ 378th would Now you can take out insurance to cover the $ 6,000 in the same cost as a car payment, or you can put your faith in honed his excellent driving skills. The problem with the second option is the guy that's not true you know what a great driver you are.