Car Dealer Scams: Auto Trade-ins and Negative Equity
With this, one of the most widespread car dealer scams, the auto dealer assures to “pay off your trade-in no matter how much you owe”. Such kind of ads are shown on TV, aired on radio and published in print media. But they are insincere at best. Vehicle owner which is upside-down on his trade-in (owes more on the car than it`s worth) has “negative equity”, and the dealer`s words the customer shouldn`t care about the old car loan may sound misleading.
As requested by FTC (Federal Trade Commission), nation`s consumer protection agency vehicle owners with negative equity should carefully pertain car trade-in offers. The dealer will pay the difference and then attach it in the new car note. And the consumer will be entitled to pay for the new vehicle and the balance owed on his trade- in.
Let`s describe how one of the most common car dealer scams work. If your loan payoff is $15,000 but you vehicle is worth $13,000 your negative equity is $2,000 which must be paid until trading in for a newer vehicle. If the dealer assures that he will pay this amount he includes it into the loan on a new car and deduct from your down payment. As a result a monthly payment is increased, and you`re entitled not only to pay this $2,000, but finance it too.
What to do to avoid negative equity car dealer scam.
- Before going to the dealership find out what your current car is worth. It can be don through National Automobile Dealers Association`s Guides, Kelley Blue Book or trustful online resources, like Edmunds.
- As requested by federal low dealer must disclose to customer the cost of credit. Carefully read the information regarding amount financed and down payment. Before signing the contract try to understand how the dealer treats your negative equity. Make sure that all the promises made by dealer orally are included in the contract.
- The length of new loan term should be as short as possible. The longer is the loan the more time it will take you to reach positive equity in the car.
To report car dealer scams including finance contracts, false advertising and promises, consumers should contact Federal Trade Commission and your state General Attorney.
Remember that qualified dealer fraud attorney will always help you to protect your rights.