BUY A NEW CAR AND GET $5,000?

Here's a proposition you don't hear every day: Buy a new car, put no money down, and walk out of the dealership with a check for $5,000. Is it possible? Yes. It is a good idea? Almost certainly not.

There’s a dirty little secret of the new car sales business -- one that helps dealers but can really get drivers into financial hot water. Dealer-friendly lenders will allow consumers to take out new car loans that actually exceed the value of the loan -- in some cases by up to 20 percent. That means when you buy a $25,000 car, a friendly lender might loan you up to $30,000.


These are called negative equity loans, and they are a necessary evil in a world where consumers often drive onto new car lots with old cars that are "upside down" -– meaning they owe more on their current loan than their old car is worth. They also don't have the means to make up the difference with a cash payment. It’s a widespread problem. J.D. Power and Associates estimated in 2009 that one in four new car buyers with a trade-in were upside down.

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