Auto Equity Promoters


How Auto Equity Works

Auto equity promoters usually target consumers who have leased or financed an auto and can no longer afford to continue making monthly payments. These consumers are reluctant to terminate their finance agreement because of the large termination penalty. Promoters attract these consumers with the promise of finding someone to "take the car off of their hands." Through advertisement, promoters find another consumer (subcontractee) willing to take over the lease or finance payments in exchange for the automobile. The subcontractee often is attracted to the deal because poor credit prevents them from leasing or financing a car of their own. The promoters charge a substantial fee to the subcontractee for finding the automobile. Most arrangements of this type are prohibited by auto-financing or auto-leasing contracts. Promoters attempt to have these arrangements kept secret by having the subcontractee make the payments to the original contract holder. The contract owner then makes the payment directly to the leasing or financing institution.

Initially, the auto equity promotion arrangements seem to solve the problems of both the person that does not have a credit rating high enough to finance an auto, and the person that is in danger of damaging their credit rating by failing to keep up with their monthly finance payments. Unfortunately, many of these agreements do not result in happy endings.

Auto Equity Promotion Problems

While this promotion arrangement may seem attractive to many consumers, a variety of legal problems may arise.

Auto equity promotion arrangements may lead to repossession of the automobile since they are in violation of most financing or leasing contracts. In the case of repossession:

  1. The original contract holder may suffer damaged credit and may be liable for any penalties imposed by the Attorney General and the early termination penalty from the lending or leasing institution.
  2. The subcontractee may lose all claims to the automobile, fees paid to the promoter, and as well as monthly payments made to the original contract holder.

If the subcontractee stops making payments to the original owner, the original owner is still responsible to make payments on an automobile that is no longer in their possession.

If the subcontractee has an accident without adequate insurance, the original contract holder is left with legal liability to cover the damages. Parking tickets are also the responsibility of the original contract holder.

In the case of financed cars, the original consumer runs the risk of being criminally prosecuted under New York State Penal Law by disposing of a vehicle through an auto equity agreement.


In January 1997, New York State amended the General Business Law. It is now illegal to deal in auto equity promotions. Violators of this law can now be fined up to $1000. New York follows 10 other states (Arizona, California, Colorado, Florida, Georgia, Illinois, Missouri, Texas, Virginia, and Washington) in passing laws to specifically prohibit the activities of auto equity promoters.

What to do

If you are having trouble maintaining regular automobile payments, check with your lending institution, or leasing company. Often if you explain your circumstances some arrangement can be worked out.

If you run across advertisements for auto equity promoters, report it to the Office of the Attorney General. Consumers can also file complaints against auto equity promoters with:

New York State Office of the Attorney General
Bureau of Consumer Frauds and Protection
120 Broadway
New York, New York 10271
(212) 416-8345

Consumers can file a complaint with Better Business Bureau here, report a suspected scam here and read more about avoiding scams here.