Negative Equity

Negative equity, or being upside down on a trade, is when more money is owed to a lender on a trade than the vehicle is worth. Including negative equity in a finance transaction is legal, provided it’s disclosed correctly. A key compliance consideration when financing negative equity is to make sure the transaction is properly documented on the installment sale contract. In this lesson, you will learn the two methods for disclosing negative equity on the RISC. You will also be presented with a case study in which a dealer was found liable for failing to properly disclose negative equity.