An upside down car loan is a situation in which you owe more on your car than it's worth. Since new cars depreciate the second you drive them off the lot, purchasing a used car may help you avoid being upside down on your car loan.
If you do find yourself upside down on your car loan, there are a few solutions. First, you can refinance your car to a lower interest rate, assuming either your credit has improved or interest rates have gone down. A lower rate will allow you to pay more money toward the principal each month. You could also make extra payments on your loan or use a personal loan or home equity loan to pay off the balance. Keep in mind, though, that there are risks involved with both of those options.