You hear the dealer’s ad on the radio and decide to go visit them. You have your vehicle appraised and they offer you $10,000 for your car. You still owe $17,000 so you’re looking at $7,000 negative equity. Why would the dealer give you an additional $7,000 for a vehicle that’s only worth $10,000?
The dealer will take your $7,000 negative equity and add it to the $21,000 you are financing for your new car. You’re now paying $28,000 plus interest and fees on a vehicle that’s far from worth it. The dealer may also extend the term of your contract out 60-72 months or more so you don’t notice the increase in the amount financed.
By extending the term out far enough the dealer may actually lower your payments. You may think you’re getting a great deal, but you’re really getting bent over. You should also be aware of extended-term leases up to 60 months. These kinds of leases will greatly reduce your monthly payment amount but at the end of the lease term you will have a large residual payment and you will still NOT OWN THE CAR!
This type of dealer advertising scam leads you to believe you’re getting out of your current car loan or lease and the dealer is absorbing your negative equity. This cannot be further from the truth. By continually rolling the negative equity into your car loans, you’re putting yourself in a deeper financial dilemma.