What does it mean to be 'upside down' on a car loan?

What does it mean to be “upside down” on a car loan?

It means you owe more on your loan than your car is worth.

Example: You owe $20K but your car’s value is only $17K — you’re upside down by $3K.

Why does this happen? Cars lose value faster than you pay off the loan, especially with: 

Long loan terms 

Little or no down payment

Being upside down is risky if your car is totaled or you need to sell — you could owe money after the sale.

Tip: Make a solid down payment and avoid super long loans to stay in the clear.