I get so frustrated when I hear people try to justify buying an expensive car they can’t really afford by saying, “Well, it’ll hold its value.”

The truth is, no vehicle holds its value unless it’s a classic or rare car.

The average vehicle retains only about 35 percent of its original value after a five-year ownership period, meaning that a car bought new today for $20,000 will be worth $7,000 after five years.

Car valuations matter because an increasing number of consumers are upside-down on their auto loans, meaning they owe more than the car is worth. In the first quarter of this year, 29 percent of consumers were upside-down on their vehicles, according to Kelley Blue Book, a leading provider of new- and used-vehicle information. Additionally, on average people traded in cars on which they still owed more than $3,600.

And what do these buyers do with that loan balance when they want another car?

They roll that negative equity – the $3,600 and often much more – into yet another vehicle loan.

“It is a pandemic,” says Jack Nerad, executive market analyst for Kelley Blue Book.

It also is financial lunacy. And making matters worse are risky lending practices similar to what we’ve been seeing in the mortgage industry.

To make the loans work for many of these subprime borrowers, who typically have shaky credit, lenders are offering car loans with longer payment periods.

The same factors that are pushing subprime homeowners into foreclosure – rising interest rates on credit cards and home loans – could cause subprime car owners to default on their vehicle loans, said David McKay, senior director of auto finance and insurance at J.D. Power and Associates, a marketing research firm.

Let’s say you push your budget and purchase that pricey car. Then something changes – your income drops or your mortgage increases. You no longer can afford the car. However, because you took out a long loan with little money down, you owe more on the car than it is worth.

To stop this madness, there are at least two things you should do.

First, use a 48-month car loan as a benchmark for affordability. If you can’t handle the monthly payments with a four-year loan, you probably can’t afford the vehicle you’d like to buy. Keeping the loan to 48 months or less also reduces the chance that you’ll be upside-down on your car should you need to trade it or sell it.

Next you should research the resale value of the car you’re interested in purchasing. This will help you see that getting a long loan on a particular model could be trouble, especially if you tend to trade in and out of cars. Kelley Blue Book now provides a depreciation chart on its Web site (www.kbb.com) that shows projected resale values for all new vehicles. On the Kelley Web site, as well as at www.edmunds.com and www.consumerreports.org, you can find lists of the best and worst vehicles for depreciation.

But even if the car you select has a good resale rating, it’s still a depreciating asset.

There is a substantial difference between assets that have the potential to appreciate or that truly hold their value versus those that depreciate year after year. Your goal should be to put more of your money in appreciating assets.