Car dealers routinely make far more profit on the “iron” when they sell a used vehicle instead of a new one. The reason is simple. New motor vehicles have a factory window sticker on them that tells you, in a pretty honest way, what the manufacturer suggested retail price is.

There is no “suggested retail price” for a used vehicle. It is whatever the dealer can get away with. As a result, they sometimes try to get away with a lot — a lot of your money. Beware of these potential negative equity scams.

One way dealers do this is by claiming you have a vehicle negative equity in your trade in vehicle. This is one way to boost extra profit out of the deal without you realizing it’s happening to you.

Watch out when a car dealer says that you have “negative equity” or negative trade-in value. Half the time it probably is not true at all. The other half of the time, it probably is not as bad as they want to make you think it is. Either way, what may really be happening with “negative equity” is that the car dealer is trying to make extra profit.

Negative trade-in value simply means that your trade-in vehicle has a fair market value that is less than what you owe on it. This could be because you have not owned it very long, and you still owe a very high payoff on it. It could also be because the last dealership where you traded a car in, and who sold you this one, started you on this cycle of vehicle “negative equity.”

You need to know, for certain, what your trade-in vehicle is really worth. You can look it up in books you can buy at the bookstore or find at the local library, or you can even ask a local bank to give you the value numbers. Those numbers come from several different publications. There is what some people call the “Blue Book” (which is really yellow) published by the National Automobile Dealers’ Association. Most libraries have this and many bookstores sell this. Car dealers get it monthly and it lists the base price of the vehicle for trade-in, wholesale and retail purposes, along with options that are worth anything and deductions for high mileage, among other things. These numbers are probably “conservative” but perhaps more realistic than the other books that are available.

Different areas of the country find one book more popular to use than the other, but virtually everyone uses the NADA “blue book”.

However, if you want to know what your vehicle is really worth, forget about all of those books. Instead, look in your local newspaper or “trading post” or car magazine. The odds are that the most realistic and accurate numbers are going to be found there. Before going to trade your car in, you should check all of this out and you might want to call your local credit union or bank too. Don’t forget to add something if your vehicle has low mileage or is in extremely good condition.

In any event, just remember: “negative equity” means only one thing to a car dealer — Positive Profit!

If you’ve been ripped off by a car dealer, email-fax-phone us for a free case review.