Describes a situation where the balance owed on a loan is greater than the current value of an automobile.
A situation in which the fair value of an auto is less than the principal balance of the auto loan. This can be caused by the large depreciation in the auto from excessive wear-and-tear during the early years of the auto loan term.
When the value of a vehicle is lower than the outstanding balance of the loan secured by the vehicle.
Consumers might find themselves "upside-down" when their outstanding loan balance is higher than the current fair market value of the item purchased with the loan. For example, this situation is most common with vehicle sales or leases because in the early years of a lease or loan, the vehicle depreciates quickly, but the outstanding balance stays high. See also "Depreciation."
A position that consumers find themselves in when the outstanding balance of a loan is higher than the current fair market value of the property purchased with the loan. In automobiles, it is most common in the early years of a lease or loan, when the car is depreciating rapidly but the balance owed remains very high.