Didn't know all of us hindus were douches :D
Good luck with the car.
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That is shady though. But he's seeing the value you have in the car and trying to wrongly capitalize on it. You had an agreement and he should honor that. I certainly would NOT go beyond that agreement. Just tell him "We made an agreement to trade plus $500 extra. That is as far as I'll go. If you change your mind, here's my number".