Is it better to save money for a down payment, or make a higher monthly payment on your car for more equity?

I've just purchased car for which I incurred some negative equity. Therefore I owe slightly more that what it is worth. Should I make higher monthly payments than what is due, or just save the money that I would make in addition to what is due and use it as a down payment for when I trade this vehicle in? Just seems like the latter choice would be better, since whatever extra money I put into the car, will be somewhat lost to depreciation when I trade this car in, and I'm likely to trade it in before its paid off due to the mileage I'll put on it. Whats important here is that I will be trading this in with negative equity. What will have more value when purchasing my next car, $2000 cash, or less cash and a vehicle thats more paid down. I think the interest I would save on making higher payments would be somewhat neglegible when compared to trade in value

Public Comments

1. IT depends on a couple of things. What is the rate you are getting on the loan? What sort of investment return could you expect on the money ifyou invested it instead? In general, if you can get financing for a low rate it's better NOT to put a big deposit down. You will be better off having access to that cash and earning a return if you invest it.
2. As soon as you buy any car, it has negative equity. The point at whitch you break even is the difference. There are formulae you can use to determine the break even point.
3. I would make the extra payments if you can afford them. If you do make sure they are applied to the pirincipal. If you get the value of the car less than the amount you owe on the loan you can then sell it yourself and make 10-20% more than they would give you on any trade in. Trade ins are a rip off usually..they will only give you wholesale value for the car. Trading in a car with negative equity is a bad idea. They just put the negative equity onto your new loan. Then your down payment is pretty much useless. I'd make an extra payment every other month and save the money for the months you don't. That way your loan bablance will be lower and you would have some money saved for a down payment.
4. $2,000 cash and a payoff lower by $2,000 are equivalent when the time comes to buy a new car. Trade-in value is also irrelevant assuming you have enough cash / borrowing power to make up for the shortfall. The answer entirely depends on interest rates and investment returns. What is the interest rate on the car loan? If you have other loans with higher interest rates (including credit card debt), pay those off first. If you have no higher-interest debts, and don't pay down the car loan, what will you do with the money? If you'd invest the money, would you earn more than you're paying in interest on the car loan? If not, and there's also little chance you'll have an emergency need for that money, then it's best to pay down the car loan. Finally, if the alternative use for the money is purely discretionary spending, stuff you don't really need, you should probably pay down the loan. Otherwise, you're essentially borrowing money to buy those things.
5. AS A PROFESSIONAL BANKERWORKING IN INDIA,I WOULD ADVISE THE SECOND OPTION.IN TERMS OF ACTUAL CALCULATIONS,A CAR LOAN OF RS 5.00 LACS WILL CARRY AN INTEREST OF ABOUT 2.00 LACS OVER A PERIOD OF ABOUT 4 YEARS AT THE RATE OF 11% PA.YOU SELECT THIS OPTION AND INVEST YOUR 5.00 LACS IN SHARES/MUTUAL FUNDS/REAL ESTATE,YOU ARE SURE OF GETTING A RETURN RANGING FROM 20-50% AND IF ARE A LITTLE BIT ADVENTUROUS AND INVEST DIRECTLY IN REAL ESTATE OR IN GOOD SCRIPS YOU CAN GET A RETURN OF MORE THAN 50%ALSO.THIS IS MY PERSONAL OPINION.
6. I would suggest putting extra money into the car until you get to the break even point. If you are still upside down in your loan any extra money you have saved up when you trade it in will go towards paying the difference in value and what you owe. It is important to have a car, but they almost always lose value. I would hate for you to have to pay any money that you have saved up to the bank because your car lost value. Also, typically when you trade a car in they give you a credit towards a new car. This means that you will not actually have a cash in flow to pay towards the old car. I would highly recommend paying extra on your payments each month so you do have a major financial hit when you have to pay off the other loan.
7. No matter what with the car market. Blue Book vs. black book. You are upside down the moment you purchase. Dealers go by black book and banks go by blue Book. The difference between them is fairly substantial. This pretty much applies with new or used, but not as bad for used. Now It depends on your loan rate for one. General rule of thumb on purchasing without any negative equity. Due to interest you have to pay on a car if you make the minimum payments it will take about 3 years to be about equal car value to loan value. With negative equity it takes longer. Me personally would make higher than minimum payments. One it looks better on credit to pay items off early. Two: If you don't actually save or invest the money then you haven't made as much progress on the loan and are still in the same situation with possible negative equity. Like you said you can also use it as a possible positive trade later and not have to deal with negative problems again. Note: I hope you have gap insurance. This will cover the difference in loan value to car value in case of the horrible possibility it is totaled in an accident. If not you could be stuck paying on a for a vehicle you don't have. Insurance will give you blue book for but if you owe more than that you are screwed.
8. It is true that the value of a vehicle does decrease the moment you drive off the lot. There are some here though,that make a gross error by stating you instantly have a negative equity situation (upside down). If you put a sufficient down payment or couple an amount of cash with a trade you can leave not owing more than you could sell for. Obviously the less you owe on a vehicle the better off you are.
9. let say your car payment is six years and you pay 252 a month then what you have to do is calculate to see how much you would be paying if you paid it in 5 years if its 290 dollars make payment that way you pay it in less years that if you plan to stay with car for a long time.Alot of people get cars and get to refinancing there house just to pay it off i think that unless you really cant make payments it okay but if not that's wrong your going to be stuck with a larger house payment remember that a car can get payed of into 5 to 6 yrs then why not just try to pay it off with out refinancing that well be there for longer then a car payment the house payment.its true what you say cars go down on value but if you plan to keep car for a while i would pay it in less years and try to take good care of it maintain the oil changes and service so it well last i hate car payments.that's my opinion on it.