Thrifty Spending Issue 94: Feature Article

Car Ads too good to be true?

Every day consumers are bombarded with cars ads on the radio and on television that grab their attention and get them thinking about trading in their current automobile.  Consumers are targeted with special finance offers such as, “no money down,” or “if you work, you qualify” Some of those ads although true are sometimes misleading. The dealer neglects to state that the interest rates on these loans may be astronomically high, and the cars in these ads may be high mile models, or have a history that could include accident damage.

The ad that has really gained a lot of attention lately, mentions how the dealers “will pay off your current loan no matter what you owe”. Consumers that may have purchased a car for full list price with no money down and a high interest rate, or even traded a car where they owed more than the traded value, are prime candidates for being “upside down” in their current car.  Being “upside down” is a phrase used to describe people whose debt on a car is more than the vehicle’s worth.” In these recent ads dealers are heard saying that they will pay off the current car (even if upside down) if a consumer comes in and purchases a new car. Sounds great, right? The problem is, they neglect to inform in the ad that the payoff amount will be added to the price of the new car which will ultimately put them further upside down on the new vehicle. The Federal Trade Commission (FTC) agrees and has recently cracked down on a handful of dealerships across the country. The FTC’s complaints allege that despite the dealers’ claims, consumers still end up being responsible for paying the difference between the trade-in loan balance and the vehicle’s value. The complaints that charge the dealers’ representations that they will “pay off” what the consumers owe are false and misleading, and violate the FTC Act. In addition, the complaints in three of the cases allege violations of the Truth in Lending Act (TILA) and its implementing Regulation Z for failing to disclose certain credit-related terms. Two additional complaints cases allege violations of the Consumer Leasing Act (CLA) and its implementing Regulation M for failing to disclose certain lease related terms.

Consumers should do their research before going to the dealership. Finding out what is owed (auto loan statement) and the value of their car before shopping is imperative. To check the value ranges and the trade in value, consumers can check or It may be worthwhile to consider selling the car first and bringing cash to the dealership. Find the current auto loan rates at and use their calculators to see what the new payment might be. If consumers discover they may be upside down, the best cure may be to keep the current vehicle and keep paying down the debt before trading.

Become an educated consumer, get a copy of the offer being made, go home and review before signing. Buyer beware!!!

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