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FINANCE & LEASING: The brutal recession has rendered some operators upside down on their vehicles, with the outstanding loan or residual exceeding the value of the vehicle.

A few years ago, you rarely ever heard the term "upside down" as it pertains to auto loans. Today, you hear it too often. Being upside down in your vehicle means that you owe more on it than you would be able to get for it if you sold it or traded it in. Basically, if you truly need to get rid of your vehicle, you will need to take money out of your pocket to cover the difference of what you still owe over the price the buyer is willing to pay. Being upside down means that you will need to pay to get out of your vehicle.

Don Coolbaugh, vice president of sales for Advantage Funding, Inc., says, "Due to the economy, there is a lack of demand for limousines and market value of commercial vehicles has sharply declined. Combine that with improper lease and finance terms used the past several years and the result is many operators owe the bank more money than the vehicle is worth when they want to trade it in. Many banks with little knowledge of our business made what looked like favorable terms for customers, such as $0.00 down, lengthy terms with low payments in effect starting their clients behind the eight ball. They never made it back since commercial vehicles depreciate much quicker than their loans amortized."

This situation has become exacerbated because the market for used vehicles has become smaller, especially used limousines. This is simple Economics 101 folks; when demand drops, so does price. 

Tim McLaughlin, Limousine Leasing Agent for Jake Sweeney Auto Leasing, Inc., says "The limo market now is a buyers market with prices and values down.  That is what is really hurting the industry now especially for manufacturers. Operators are using their older vehicles or they are taking them to get refurbished to run longer through the tough times."

If nobody wants your car, you won't be able to get rid of it at top dollar regardless of what great shape it's in. If the market has too many vehicles up for sale, it becomes a buyers market and the buyer can essentially name his price. With the current economy, being upside down is far too common in the ground transportation industry. Being upside down is only a problem if you decide you no longer want the vehicle or can afford the payments.