When a $38,000 car costs $44,000

Part of the trend is attributable to "an escalation of taste," says Paul Taylor, chief economist for the National Automobile Dealers' Association. As designer clothing and household goods have become available through mass-market outlets like Target and Kmart, consumers have come to expect even everyday products to be flashy and luxurious more than they did just a few years ago. Where people used to be satisfied with safe, reliable transportation, they now regard features like leather upholstery, elaborate stereo systems and heated seats as necessities even on economy cars. They also assess extra-cost options based on how much they add to the monthly payment instead of their total cost, so they have a greater tendency to add luxury features like rain-sensing windshield wipers, power-operated cargo hatches and seats that even massage one's backside.

Such features keep coming at shortening intervals. "In the 1980s, cars were refreshed or redesigned every four to seven years, but now it's happening every two to three years," says Jesse Toprak, an analyst with Edmunds.com, an automotive-research and -buying site. Drivers who want the latest model with the snazziest features often wind up looking for a new car even though they have a year or more to go before paying off their current car.

With such buyers, dealers make a pitch based on getting the customer into a new car and taking the old vehicle in trade while keeping the monthly payment the same. The downside is that the deal may require stretching the terms of the new loan to seven or eight years. "It's the worst way to buy a car," Toprak says.

Auto buyer who opts for longer loan term more likely to owe more than the car's worth