The Better Business Bureau has issued a warning putting consumers and local financial institutions on alert for "Auto Equity Promotions."
Several promoters have set up shop locally, advertising they can relieve the burden of a financially strapped car owner while getting anyone into a new car for nothing down, local BBB president Bill Beadle said.Auto Equity promoters act as brokers, Beadle explained, as they offer to take over purchase or lease payments of a troubled buyer by finding another party to assume the payments.
The promoters collect fees, up to $800, from both parties.
The risk falls on consumers who think they are being relieved of the burden of making car payments and on financial institutions unaware the arrangement has taken place.
"The broker usually subleases or subpurchases the vehicle to someone with a bad credit rating," Beadle said.
"What the car owner doesn't realize is that if the party subleasing the vehicle doesn't make payments, he (the owner) is still held liable and it can hurt his credit rating."
At times the broker may fail to make the payments to the lender.
Beadle advises consumers to be sure they still bear full responsibility for making payments after entering into an auto equity agreement. Also, consumers should know that such arrangements may violate the contract with their lender.
"We have received a couple of complaints and a number of inquiries from local banks," Beadle said, noting that car owners having trouble making payments should first try to work with their lender.