When the dealer handed you the keys to your new car and you drove off, you assumed that was the end of the purchase. You applied for financing, the dealer said you were approved, and you were the proud owner of a brand-new SUV. You were shocked to get a call from the dealer a week later telling you to return to the dealership with the car because there was a problem with your financing.
How a Yo-Yo Sale Works
Contrary to what they may lead you to believe, car dealerships do not finance car purchases themselves. They may offer you financing terms, but they will then attempt to sell the contract to a third party for those terms, and, if they can’t, they will come back to you for more money or for the car. This is known as a yo-yo sale because the dealer lets you go, then yanks you back just like a yo-yo on a string.
These deals tend to happen with on-the-spot delivery. If a dealer allows you to sign a contract and leave with the car the same day, he hasn’t actually gotten approval of the terms of the loan he has offered you. If he can’t get an outside lender to agree to those terms, he will have to get you to make a bigger down payment or agree to larger monthly payments, or he will take the car back. These scams tend to happen to buyers with poor credit and few financing offers.
How Can Car Dealers Do This?
Whether you were aware of it or not, you probably signed a conditional sales agreement when you purchased your car. In an ethical deal with a reputable dealership, this usually means that the sale is contingent upon you obtaining your own financing. Yo-yo dealers, however, are now using the conditional sales agreement to allow them to find a buyer for the financing deal they made with you. If they can’t find a lender to take over the contract, they can cancel the deal they made with you—even months after you took possession of the car.
What You Can Do About a Yo-Yo Scam
If you were the victim of a yo-yo scam, the experienced auto fraud legal team at The Consumer Law Group can make sure you are compensated for your down payment and other damages. Even if your down payment and trade-in have been returned to you, you still may be able to take action against the dealer. Call our office at 804-282-7900 for a free review of your case.