Scam: Yo-Yo Car Sales Trap

You just signed the sales contract to buy your dream car. You were promised low rate financing by the car dealership’s manager of Finance and Insurance. You drive your new car home and show it off to your friends, family, coworkers and neighbors. Everything is going great until you receive the “yo-yo” car scam phone call from the car dealership.

On the “yo-yo” phone call, the dealership tells you that you did not qualify for the financing rate agreed upon on the sales contract that you signed. Further, they tell you to come back to the dealership with your new car. At the dealership, they tell you that you need to sign a new contract with a higher interest rate and/or pay an even bigger down payment.

Today, car buyers – especially those with bad credit – are falling prey to a scam known as “yo-yo,” “bait-and-switch” and “spot financing.”

The “yo-yo” or “spot financing” scam means that the buyer is sold the car on the spot and drives off the lot before loan financing approval is complete. Dealerships know that when a buyer drives home with the new car, posting pictures of it on Facebook, showing it off to coworkers, the buyer grows attached – it would be humiliating to be forced to return the new car simply because the financing fell through. Further, most consumers are not savvy about negotiating with banks and lenders for the best financing rates. Knowing this, dealers prey on consumers eager to drive off with a new car without first securing a loan from a third-party lender.

Dealers will try to make you pay a bigger down payment and sign a new contract with higher interest rates by:

  • Making it seem like signing the dealer’s new contract is your only option.
  • Threatening to…
    • Destroy your credit by reporting you to credit agencies.
    • Repossess the vehicle.
    • Report the vehicle as stolen, leaving you stranded at the dealership.
    • Report you to your employer.
    • If you are in the military, threaten to report you to your base command.
  • Claim that…
    • Your credit is lower than it it really is, making the dealer’s new contract with a bigger down payment and higher interest rate seem like the best deal you can get.
    • They did everything to obtain a loan with a loan rate even though the dealership did not submit the paperwork to third-party lenders.

4 Ways to Avoid “Yo-Yo” Financing Scams

    1. Save up for your next car and pay in cash, instead of taking out a loan.
    2. Buy a used car for a better deal and value–New cars rapidly depreciate when driven off the lot.
    3. Shop around at reputable banks and credit unions for a loan. Get pre-approved for a loan before car shopping. Third-party lenders pay dealerships more for high interest rate loans. Never let a dealer arrange a loan financing.
    4. Avoid advertisements saying,“Bad Credit? No Problem! 0% Financing!” . Dealerships use these advertisements to lure in unsuspecting buyers, especially those with bad credit or low-income.

4 Things To Do If A Dealership Attempts Yo-Yo Scam and Demands Return of the Car

    1. Have a friend follow you to the dealership in another car. If the dealership demands that you sign a “new contract” with a higher interest rate, do not sign and have your friend drive you home.
    2. Get everything in writing. Have the dealership put in writing that you failed to qualify for financing under the original contract. By putting it in writing, the dealership is admitting that the original contract is no longer valid due to lack of financing. If the dealership refuses to put it in writing, leave the car at the dealership and write a letter to the dealership explaining that they refused to put in writing that the original financing was not approved and the original contract is no longer valid.
    3. Never sign a new contract with higher interest rates or a larger down payment. The “yo-yo” scam takes advantage of the buyer’s attachment to the new car and uses intimidation tactics to force the buyer to agree to worse terms than the original contract.
    4. Stay calm and contact an attorney specializing in auto law. Dealerships may pressure you into signing a new contract by threatening your credit, reputation and reporting the car as stolen. Stay calm, leave the car and keys at the dealership. The dealers may even refuse to return your down payment. Stay calm and contact an attorney.

Protect Yourself from Yo-Yo Financing and other Scams

The bottom line is, cars are a big life investment and fighting for your rights can be complicated.  Make sure you get everything in writing and keep all of the documents from the deal.  If something doesn’t make sense, have the dealership explain it.  If you think you are being taken advantage of or if the car is having problems that just don’t seem right for a car you just bought, contact a lawyer because you may be able to do something about it.

For more information or to schedule a consultation, please email me at or call (718) 404-6668. I look forward to working with you!

This material may be viewed as attorney advertising and does not constitute legal advice. This information does not create an attorney-client relationship between you and the author. This article strictly represents the personal views of the author on the date it was written and such views are subject to change without notice. 

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