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BBB faults negative equity claims in some local dealer advertising

August 17, 2012
Some local dealer ads that reference negative equity need to be clearer in their disclosures, said the Chicago office of the Better Business Bureau, which monitors all such advertising.
“Dealers have been under the belief that they can say, ‘We will pay off your trade, no matter what you owe,’ or similar language, while adding the negative equity disclosure,” said Patricia Kelly, the BBB office’s senior counsel. “However, the claim that a dealer will ‘pay off’ a consumer’s trade in loan is false. 
“The dealer may write a check during the course of a transaction but the dealer does not pay off the consumer’s loan with dealer money. The consumer actually pays off his or her own loan by refinancing the amount left on the trade in loan. 
“Use of the negative equity disclosure in this context does not cure the fact that the dealer is claiming to pay off a loan when the consumer is actually paying off the loan, not the dealer.”
Kelly said that in her office’s discussions with many dealers who ask for pre-publication review of their ads, the BBB indicated that such language cannot be used because it is untrue.
The negative equity disclosure is useful in the context of a dealer making a savings claim while offering new financing on a new vehicle, she said. 
“Here the dealer suggests to consumers that they can save on monthly payments by trading in and purchasing a new vehicle,” Kelly said. “This can be absolutely true in terms of monthly savings.
“However, while saving money monthly, consumers are also taking on bigger debt when they still owe on the trade-in loan and that amount is worked into the new loan. The negative-equity disclosure serves to complete the picture. 
“While monthly savings do happen, more money is ultimately owed, and consumers who see the negative-equity disclosure understand this point.”