Are you upside down in your car? Avoid having negative equity in your vehicle at trade-in time.

David Washington thought he had gotten a pretty good deal when he bought his wife a 2000 Chevy Cavalier in the summer of 2002. Washington, 31, had a decent credit score of 650, and though he hadn't done a lot of research on the Chevy, he decided $11,000 was a reasonable price to pay.

His wife, Bonita, was happy with the car for about a year until repair costs skyrocketed. Parts and services were costing the young couple $500 at a time. Both soon decided that the tiny car wasn't worth the financial headache. "We went to a Car Max dealership to see what the payoff amount would be if we traded it in. We found that we were about $7,000 off," says Washington, a document control administrator for International Aviation Consultants in Atlanta.

At the time, the Chevy was worth only $1,500. The Washingtons still owed 57,000 on it and a trade-in would have left them with $5,500 on top of the new car note. CarMax told them they had two choices: either trade in the car for a new one and pay a $400 monthly car note or turn in the car on a lease agreement. The couple went to a Jeep-Chrysler dealer for a second opinion, and when given the same options, they chose to lease a Jeep Liberty. The salesman told them that after three years they'd be able to turn in the Jeep and the negative equity they'd accrued with the Chevy would be gone. "I felt I was left with no choice," says Washington, who has a year to go on his lease agreement. "We will just have to see what happens."

The Washingtons are not alone. According to Edmunds.com, an automotive consumer information Website, 26.2% of consumers who traded in their vehicles for a new car this February still owe more on the vehicle than it was worth. This is known as being "upside down," or having negative equity, on a car loan. Edmunds.com found that the 1 average amount of negative equity is $3,646.

"I would say that a majority of African American buyers I have served had negative equity, anywhere from $3,000 to $7,000," says S. E. Day, a former car salesman and founder and president of Automotive Liaison Services L.L.C. in Atlanta. "Most people spend too much time negotiating the price of the car instead of the interest rate and end up getting ripped off during the last 15 minutes of the purchase." "If I had to do it all again, when I first bought the Chevy, I would have researched the car," says Washington. "I'd have tried to find one that would hold its value better. It would have saved us a lot of money."

HOW TO GET RIGHT SIDE UP

Here are some tips for avoiding negative equity in your trade-in:

* Don't tell the salesman about your trade-in. Wait until after there is an agreement on the purchase of the new car. If you still owe on your current car, trading it in may not be the best option.

* Do the math. Calculate how much your car is worth and how much you owe on it. If you owe $3,OO0 on a car you want to trade in, for example, you could end up with a higher car note.

* Make car payments on time. Hill says it's best to make car payments on time and not to defer them. You will have to pay interest on the deferred payments, which will leave you with a balance once you reach the end of your loan.

* Look beyond the monthly payments. "You could gain thousands of dollars in negative equity by focusing only on how much you can pay monthly," says Tamara Hill, Internet salesperson for David Maus Toyota in Longwood, Florida. The dealer can always work the numbers to suit your desired payment schedule--don't fall into that trap! "Your focus should be the entire cost of the car," says Hill.