Car loans are certainly less costly than home mortgages, student loans, or other kinds of loans. So why do so many people end up defaulting and losing their cars? Find out these hidden dangers:

Biggest Hidden Car Loan Danger: The Inherent Money Pit

Unlike home mortgages, student loans or other big-ticket loans, car loans are inherently money pits. A house can build equity; higher education can increase earning potential; even jewelry can sometimes be re-sold for as much as was paid for it. If you borrow to buy one of those things, you may eventually get a return on investment. But every single car loses significant value and keeps losing it as time goes by.

Solution: spend as little on your car as possible.

Of course, in order to spend as little as possible over life of vehicle, you need to get a well-made, fuel-efficient car, rather than one with lowest price on windshield.

But a pickup truck, SUV, sports car, or “luxury” model is a guaranteed money-loser. Don’t worry about what other people will think. Think about it: when was last time you saw an expensive automobile and thought, "I really like and respect whoever owns that!"

The best buy? Many economists actually recommend buying a used car that's a year or two old. That way you can actually benefit from fact that cars only drop in value. Even a car that’s just six months old may offer you a substantial savings. Just have it inspected thoroughly so you don't lose what you've saved on maintenance payments.

Hidden Car Loans Danger: Dangerously High Monthly Payments

Unfortunately, most people never figure out total cost before signing on dotted line. They end up staying up late at night trying to figure out how to make ends meet. They live in smaller houses. They skip going out at night. They don’t go on vacation.

All that sacrifice to have a brand-new SUV in driveway!

Part of challenge for any home buyer is to reconcile fact that introductory rates on adjustable rate mortgages can be so low. In fact, they are often lower than market rate, and considerably lower than rates on fixed rate mortgages. Now, you can get an ARM and some of benefits of a fixed rate loan with hybrid adjustable rate mortgage.

A hybrid ARM is one where rate is locked in for first few years of loan and then will go back to market rate at end of lock-in period. The lock in period is quoted up front and written into adjustable rate mortgage contract. This period can vary from five years on up. Depending on your credit history, amount of loan, and your experience with your mortgage lender, you can negotiate lock in term as high as eight or eleven years.