YO-YO SCAMS: HOW TO AVOID A COMMON CAR FINANCING SCAM

Yo-yo scams are often used to speed up the sale of your car

By Ashley Chorpenning

AAA World Article

Buying a car can be a challenging situation to navigate, especially when some dealers use pressuring sales tactics. Certain dealers utilize financing scams to get you to sign on the dotted line. Yo-yo scams are often used to speed up the sale of your car. If you don't want to be a victim to one of these scams, here's what you should know to avoid them. 

WHAT IS A YO-YO SCAM?
A yo-yo scam or “spot delivery” is when you purchase a new or used car and then receive a call a few days later from your dealer suggesting there was a problem with your financing. They will insist you come back to their dealership to work everything out. Upon arrival, they will try to renegotiate the deal, which may yield a higher interest rate and terms that are not as beneficial as the ones they offered initially.  

If this scenario happens, what has typically occurred is the dealer has continued to shop for financing once you’ve driven your new car off the lot.

HOW IT WORKS
When using a spot delivery, dealers intend to take the buyer out of the car market before they have finalized their financing. If used appropriately, consumers can quickly get a car during the evening, or on weekends, when lenders are often closed.

If a dealer has ill intentions, they may let you drive the car off their lot, allowing you to assume you’ve taken ownership. Then, several days later, they will request you visit the dealership by exercising misleading behavior. Some dealerships may even tell the buyer they will repossess the vehicle or report it as stolen.

If you fall victim to one of these scams you could potentially end up with an interest rate that’s higher than your original agreement. 

LOOK OUT FOR THE WARNING SIGNS
It’s important for all consumers to be cautious when making any purchases, let alone a vehicle. If you want to avoid falling victim to these scams, here are early warning signs to be on the lookout for:

  • The dealer asks you to sign a sales contract but leaves some line items blank.
  • Your interest rate isn’t clearly stated on the contract or in the agreement.
  • The dealer asks you to sign a contract that's labeled "conditional."
  • The dealer lets you drive off the lot without a signing a contract or formal documentation.

HOW TO AVOID THEM
Even though yo-yo scams are simple to dodge, there are specific ways you can avoid dealer financing altogether. Before you go shopping for a car get a preapproved car loan, preferably from an independent lender. Another alternative is to pay cash if the purchase price is within your budget.

Additionally, you should always:

  • Review your contract in detail so you know the rate and terms of your deal.
  • Verify your interest rate before signing a contract and make sure it’s in writing.
  • Request copies of all purchase documentation and ensure all details are appropriately filled into the contract.

Next time you're ready to buy a new car, arm yourself with the resources and knowledge you need to make the best purchasing decision.