Do You Own a Phantom Car?

We've all heard about the Phantom of the Operamonths to almost 63 months with many of these
and the movie Phantom Tollbooth, but how aboutsame loans of the zero down variety. What this
the Phantom Car? Not the Rolls Royce Phantomleads to is an increase in the total amount of
either, but one of thousands of driver-less carsinterest paid which in turn delays the build up of
that exist only as memories in the mind's of theirequity in the vehicle. So on a typical 5 year loan
owners yet are still listed as assets on thethe principal remains virtually unchanged for the
balance sheets of finance companies.first year of the loan.
The circumstances that contribute to theWhen the absence of equity build up is coupled
metamorphosis from physical to phantom carwith the instant devaluation, or depreciation, that
ownership are the total loss of a vehicle combinedoccurs when a new car is driven off the dealer's
with the failure of the insurance settlement tolot, a deficit develops between the actual cash
cover the entire outstanding loan balance. In othervalue of the car and remaining loan balance.
words, you're stuck making car payments on aThis condition is especially prevalent during the
vehicle that no longer exists.first two years of car ownership and it would not
Although no statistics are available for the exactbe unusual if the owner of a vehicle owed five or
number of phantom cars floating around, it's safesix thousand dollars more than the vehicle is
to say that just about everybody knows, or hasactually worth.
heard of, someone is this predicament.If a total loss should occur during this time period
The principal causes of phantom car ownershipwhen insurance coverage lags behind the actual
are a combination of rapid vehicle depreciation andcash value of the vehicle, an unprepared
increasingly liberal loan terms.consumer could well be driving, or not, a Phantom
Between 2000 and 2008 the average weightedCar.
maturity of a new car loan increased from 52