The Negative Equity Scam: What you should Know about It
If the consumer is smart, he will learn about negative equity scam before buying a car. This knowledge will help you make an informed decision.
Federal laws state that prior to the signing of a contract, the dealer must disclose the terms and other information to the consumer. It is up to you to read the contract thoroughly before signing. Now is the time to ask any questions about the details, before putting pen to paper.
One question to ask is how your negative equity is going to be handled. If this is not clear before signing the contract, stop the deal. It is crucial to be completely satisfied with the answer. This way you will avoid becoming a victim of a negative equity scam. Negative equity is where the value of the car is worth less than the amount owed. The best course of action is to be forewarned and forearmed with the details of your negative equity before visiting a dealer.
What is your car worth? If you are not sure, check the Kelley Blue Book or the National Automobile Dealers Association for the current value. If you do have negative equity on your vehicle, you may want to wait until you have paid it off before purchasing another car. Perhaps trying to make extra payments on the principal may help pay the loan off quicker, turning the negative equity into positive equity. Selling the car on your own will net a bigger profit than using it as a trade-in, although this takes time and effort.
If you decide to go along with a trade-in then ask how the dealer will handle the negative equity. Make sure that any promises made in person are included in the details of the contract.
Many times the negative equity is rolled into the new car loan without the customer’s knowledge. You are essentially paying interest and taxes on two loans. A negative equity loan cannot legally be rolled into a new car loan. There is a way through this by increasing the amount of the trade-in and of the new car price.
What to do?
If you feel you have been a victim of negative equity scam contact Hovanes Margarian for legal advice.