Why is a car dealer telling me to ditch my old loan?

New cars, these days, are very expensive -- and it's almost impossible to trade in a car that you still owe on without going upside down on the next loan.

Well, some car dealerships have developed an innovative "solution," if you're willing to take a big risk: They're telling consumers to stop paying their existing car loans and ditch their old cars back to the banks that financed them so that they can afford the new car loan that they want or need.

When you see this kind of suggestion on paper, it doesn't really sound reasonable -- but car dealerships are full of sales professionals who are very good at making just about anything sound like a good idea. Potential customers under pressure and unsure how to afford the average new-vehicle price tag of about $35,000 can find themselves fooled into believing that this is now a common -- and justifiable -- procedure that won't cause them serious consequences down the line.

Don't believe it. Car dealerships don't really make anything on trades, so they aren't eager for them in the first place. They do make money when you buy a new car, however, so it's in their interest for you to drop that old car, ignore your loan and snap up the deals they're offering.

Do that, however, and you run some significant risks. When you drop your old car off at the bank and turn over the keys, the bank cannot usually get what you owe out of it at resale. You then become responsible for the difference and can be sued for it. Your credit, also, is going to take a serious hit because of those missing payments.

There are many unscrupulous dealerships out there that take advantage of naive consumers all the time. If you're suspicious that you were cheated, find out what legal rights you may have.

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