It is common today for lenders to finance vehicle purchases (and leases) that include negative equity; that is, when the customer owes more on their trade-in than the trade-in is worth. The Motor Vehicle Dealers Act (MVDA) requires that contracts accurately depict the true nature of the transaction: this includes accurately identifying negative equity.

This is an example of the correct way to reflect negative equity:

Reflecting Negative Equity on Bills of Sale

Inflating the price of the vehicle, fees or other products (e.g. extended warranties), or adding fictitious charges to bury or hide negative equity, is illegal, even with a customer’s acceptance of the practice. Dealers who create (or have a customer sign) an addendum acknowledging that the contract does not accurately reflect the true nature of the transaction (i.e. negative equity has been hidden) have actually created a written acknowledgement that the dealer has contravened the MVDA and Code of Ethics.


In cases where negative equity exists, OMVIC encourages dealers to arrange financing for their customers only with lenders who allow for the truthful disclosure of negative equity. Falsifying information, even with a customer’s acceptance and a lender’s willful blindness, is prohibited.

For more information contact your local OMVIC Inspector or the Complaints and Inquiries Team at 1-800-943-6002x3942.