Auto Dealer Yo-Yo Financing

You can often drive off the lot the same day you go to a dealership to buy a new car. But a few days later, they might call you and say the financing fell through, and the vehicle must be returned. You’re then pressured to sign a new contract with less favorable terms. This deceptive practice is yo-yo financing.

If you’re a victim of a yo-yo car sale scam, a lawyer can help you cancel the sales contract to get your money back. Talk to a dealer fraud attorney if the dealership is trying to change the financing terms after you bought the car.

What Is a Yo-Yo Financing Scam?

When you use auto dealer financing, the dealership may not have enough time to get final approval by the end of the day. Instead, you and the dealership use a conditional sales agreement. Spot delivery allows the dealership to deliver a vehicle before the financing is complete.

You may leave the lot with the vehicle, thinking you have a signed sales contract. However, the dealership often includes language allowing them to take the car back if they can’t get financing approval. If the financing falls through, you’ll get a call from the dealership saying you must return the used car.

The dealership may threaten you with arrest or repossession if you don’t return the car. When you return, they’ll pressure you into signing a new contract with less favorable terms. If you had a trade-in vehicle, the dealership likely already sold it. You’ll often end up with a higher down payment and interest rate for the same vehicle.

What Are Signs of a Possible Yo-Yo Scam?

Look for possible signs that the dealership is going to change the auto loan terms. Review the sales agreement carefully and ask questions. Don’t feel pressured to rush into signing if you don’t know what you’re agreeing to. Signs of questionable sales tactics include:

• The sales contract has blank fields
• The agreement is conditional
• The interest rate and financing terms aren’t clearly expressed in the contract
• The dealer lets you take the vehicle with no contract
• The dealer doesn’t give you a copy of all the signed documents

Is Yo-Yo Financing Against the Law?

No federal law prohibits these yo-yo financing tactics. However, the Federal Trade Commission (FTC) has proposed a new rule requiring dealerships to be transparent about spot financing. These proposed rules also prohibit any misrepresentation of the transaction as final.

Some yo-yo scams are against state consumer protection laws. A few states have passed laws that give consumers additional protections when the dealership wants the car back.

In California, dealers must notify the buyer within 10 days after the sale that they can’t find financing. Buyers must return the vehicle, and dealers must refund their money, including sales tax. Buyers can then walk away to avoid a higher financing price.

In Washington, yo-yo sales are also called bushing. It’s against state law and violates the state Consumer Protection Act. If dealers can’t secure financing, they must notify the buyer within four days. The dealer voids the contract and returns any payment or security. The dealership can only negotiate for a new contract after refunding your payment. Maryland has a similar yo-yo protection law.

For information about consumer protection laws in your state, talk to a local dealership fraud lawyer.

How Can You Avoid a Yo-Yo Financing Scam?

You can avoid yo-yo financing problems with car dealers if you have your own financing. Buying a car with cash can help you avoid a credit check and financing changes. You can also get financing through your bank or credit union. If you go into the dealership with secured car loan financing, you won’t have to worry about their financing falling through.

If you use the dealership’s financing, make sure you understand if the agreement is final or if they are waiting for the lender’s final approval. Wait until the financing comes through before signing the sales agreement.

How Can an Auto Fraud Lawyer Help After a Credit Scam?

If a dealership uses deceptive business practices, an auto fraud lawyer can help you get your money back. Many dealers get away with ripping off consumers because buyers don’t want to come forward. Reporting yo-yo fraud can help protect your rights and the rights of other consumers. A lawyer can file a fraud claim against the dealership to cancel the contract, return your vehicle, and get a full refund. Contact a dealer fraud lawyer to understand your legal options.