What Is The Negative Equity Car Scam ?
Generally speaking, some car shoppers prefer to trade in their old vehicle to purchase a new car. If you are planning to take this step, you need to be aware of negative equity car scam. It has become a common practice for certain unethical dealers. In this way, they succeed in boosting extra profits. The Federal Trade Commission (FTC) warns consumers who have negative equity to pay a special attention to trade-in offers. Very frequently, you may come across attractive advertisements. For example, the dealer promises to pay off the balance of your car loan in case you trade in your old vehicle for buying a new car. A typical outcome of this situation is that the dealer includes the negative equity in your new loan. As a result, you can end up making higher monthly payments.
Do you want to find out more about the negative equity car scam? Then, keep on reading this article.
Common forms of the negative equity car scam
To begin with, you should have a clear idea of the negative equity. So, you want to trade in your old car and buy a new vehicle. The first step that the dealer may take is assigning a value to the older vehicle. Sometimes it turns out that the vehicle’s value is less than what is still owned on that car’s loan. It means that you are dealing with negative equity. Actually, some dealers use this to cheat unsuspecting consumers and make a fortune. One of the forms of the negative equity car scam is that the seller tries to conceal the negative equity. How do they do it?
Everything is very simple. What they do is showing on the purchase contract that the payoff, as well as trade-in amount, are the same. So, what is their next step? Later, the dealer may increase the price of purchase. The goal is covering the consumer’s negative equity. At this point, you have to face unpleasant consequences, including paying high taxes on the inflated sales price. However, this is only one of examples of the negative equity car scams.
Here is a widespread form of the negative equity scam. It occurs when the dealer intentionally tells you that you have a negative equity in your trade-in automobile. The reality is that this is not true. They hide the truth to increase their financial means. Sometimes, you have a negative equity in your trade-in automobile, but everything isn’t as bad as they tell you. You should practice caution if you are determined to trade in your old vehicle for buying a new one.
Avoiding the negative equity car scam
If what you want is avoiding the negative equity car scam and getting fair trade-in offers, consider putting into practice certain tips. Any wise car shopper should find out the value of their current vehicle prior to walking into the dealership. You can have an access to this information using several sources. Among these sources are Kelley Blue Book, the National Automobile Dealers Association’s (NADA) Guides.
Did you find out that you have a negative equity in your trade-in vehicle? Consider postponing your plans of purchasing a new automobile. You can do it when you have positive equity. To achieve this you may make only principal payments for paying down the current car loan. If you still want to trade in your vehicle, then take a close look at the purchase contract. Make sure that it contains all the promises that the dealer made. Only after this, you can sign the contract.
If you suspect that you or your loved ones suffered because of the negative equity car scam, don’t panic. You should seek legal assistance. A good attorney can help you find a way out of this situation.