Pay Off Your Trade-in No Matter How Much You Owe Scam
Car dealers run ads stating, “We’ll Pay Off Your Current Lease or Loan No Matter How Much You Still Owe!” This statement is just a play on words to make you believe something that is not necessarily true. A dealer will not pay more money for your car than it’s worth.
Some dealerships claim that no matter what, they can cover the loan amount on your trade-in. If they can, how do they accomplish it? The risks of trading in a car you still owe money on and what you need to know about doing so.
What We’ll Pay Off Your Trade No Matter What Your Owe Really Means
This dealer advertising scam gets you to come to a dealership and buy a new or used car. The dealer wants you to believe they will pay off what you still owe on your current vehicle.
The dealer will appraise your car and tack any negative equity and penalties onto your new car loan or lease. This is a very tricky play on words and can put you in a worse position than you’re currently in.
This is one of the most common ads auto dealers run in their print, radio, Internet, and TV ads. They guarantee to place you in a new automobile and pay off your existing loan or lease.
It’s best to not trade in a vehicle if you still owe more than it’s worth.
Your current lease or loan payoff amount doesn’t vanish, though. The dealer takes the difference between your existing vehicle’s actual cash value A.C.V.V) and what you owe, called negative equity, and rolls it into your new car loan or lease.
If you’re trying to get out of a lease, you may also have some pretty stiff penalties to pay also. These penalties can range from a few hundred to a couple of thousand dollars, depending on the lease contract you’ve signed.
There are several variations of this statement when car dealers use it in advertising. I bet you’ve seen or heard some of these statements in the past:
- We’ll Pay Off Your Current Loan or Lease No Matter How Much You Owe!
- We’ll Pay Off Your Current Car Once We Make a Deal!
- We Can Get You Out Of Your Current Lease!
- We’ll Get You Out of Your Current Car and Lower Your Payments!
- We’ll Give YouN.A.DD.A Value for Your Current Vehicle Once We Make a Deal!
Dealers are very creative with the above statement. No matter how this statement is written, they all mean the same thing, SCAM!
How the Dealer’s Advertisement Should Read
Here is how a car dealer’s ad should be written if there was truth in advertising.
We’ll Get You Out of Your Current Lease or Loan No Matter How Much You Owe!
“Then we’ll take your negative equity and roll it into your new lease or loan. You’ll still be paying the balance of your old loan and put yourself in a worse debt situation than before. It doesn’t matter to us as long as we get to sell another car!”
Why Do Dealers Use the Pay Off Trade Scam
How someone normally finds out their thousands of dollars upside down in a vehicle is when having their car appraised at a dealership. After receiving the news, they believe the dealer is attempting to cheat them and usually get upset and leave frustrated.
Contrary to popular belief, your car may not be worth what you still owe!
Once this customer calms down, they’ll start shopping the dealer ads again. If they hear or see the “We’ll Pay Off Your Trade No Matter How Much You Owe” advertisement, they’ll go to that dealership knowing they’re upside down and give them a shot at getting them out of their vehicle.
This is how they become susceptible to the advertising scam. To avoid falling victim to this car dealer scam, learn to determine your trade-in’s value.
The Dealer’s Goal is to Drive Traffic
The main goal of this statement is to drive traffic to the dealership. Dealers know customers will have previously gone to a dealership, had their car appraised, and know they have some “negative equity” (owe more than the car is worth).
After seeing the dealer’s advertisement, the customer will be happy they’ve found a dealer willing to get them out of their current situation.
After the negotiations, the dealer will not say, “You’re welcome; now you’re going to be in an even worse position than you were before; let’s go sign the paperwork.” The dealer wants you to believe they’re the hero and got you out of your negative equity situation, but in reality, you’re the one paying to get yourself into a new car.
How the Pay Off Your Trade No Matter How Much You Owe Scam Works
You hear the dealer’s ad on the radio and decide to visit them. Your vehicle is 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 worth only $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 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 far enough, the dealer may lower your payments. You may think you’re getting a great deal, but you’re getting bent over. You should also be aware of extended-term leases up to 60 months. These leases will significantly reduce your monthly payment, but you will have a sizeable residual amount at the end of the lease term and 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. You’re putting yourself in a more profound financial dilemma by continually rolling the negative equity into your car loans.
How to Avoid this Dealer Scam
- If you want to trade in your current car because the interest rate or monthly payment is too high, you may want to consider a low-interest auto refinance loan. Refinance loans are prevalent and good ways to save a lot of money after you have already purchased a car.
- It’s best not to trade a car in that you owe more money than it’s worth. If you must trade, make up the negative equity amount with cash or wait until you’re in a favorable equity situation to trade the car in.
- You should always try and put a minimum of 20-25% cash down on a vehicle to avoid being in a negative equity situation. This also allows you to finance for a shorter term, save on bank fees and interest rates, or lower your payment and lets you trade when you want.
- If you’re currently in a lease, the intelligent thing to do is ride it out until the end of the lease term. Finishing the lease term will start you off in much better shape than trying to trade it early and being subject to any lease termination fees or penalties.