By on May 7, 2012

A man bought a new pickup. A few days after he had driven off the dealer lot, he received a phone call. There were a few changes, please bring paperwork and truck back to the dealer. At the dealer, the man was told that the financing had fallen through. The man jumped over the desk, grabbed the sales manager by the throat and started strangling him. Police were called, and the man was taken away in handcuffs.

This story, described in “Confessions of an auto finance manager” repeats all too often. Many people become victim of what is called “yo-yo financing:”

A dealer permits a buyer with a less than stellar credit to take possession of a car before the financing is actually complete. A short time later, however, the buyer is called back to the dealership. The customer is  told that he or she did not qualify for the financing that was applied for. A new contract with new financing at a higher rate is presented. The customer is faced with higher interest rates and fees. Sometimes the dealer demands a larger down payment, too.

According to Negativeequityauto.com, “yo-yo financing is one of the worst problems that plagues car buyers today.”

The yo-yo ploy is a byproduct of the “spot delivery” process, in which cars are sold “on the spot” before the financing is complete. In some states there are laws against spot delivery abuse. In some there aren’t.

Regardless of the letter of the law, dealerships can pressure unwary consumers to accept new, more expensive terms using a variety of tactics, says Edmunds.. Some dealers have threatened to repossess cars, while others even say they will report the vehicle stolen. When a would-be buyer asks to simply return the car, some dealers have demanded high rental fees or charged for excessive wear and tear on the brief period of usage.

Edmunds has this advice to avoid being turned in to a yo-yo:

Before the sale:

  • Get pre-approved financing to avoid spot-delivery problems.
  • Ask to see a copy of the confirmation from the finance company.
  • Be wary of signing any additional paperwork or “conditional” boxes in the contract.

If the cars is already in the driveway, and the dreaded call comes in:

  • Ask for a copy of the letter denying financing at the agreed-upon terms.
  • Return to the dealership to discuss the situation, but don’t bring the car. (If the dealership can prove the loan was denied, you have to bring the car back.)
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53 Comments on “Don’t Fall For The Yo-Yo Financing Scam...”


  • avatar
    stryker1

    This is so screwed up it wraps back around to being awesome.
    I wonder how many homicides have resulted from this.

    • 0 avatar
      Caboose

      Clearly, not enough. Offending dealership principals and salesmen who receive a visit from Luca Brasi would end the practice more swiftly and surely than any government regulation.

      • 0 avatar
        stryker1

        truer words never spake.

      • 0 avatar
        stuki

        Dude, just stop picking up the phone, unless it’s a call from your wife and/or kids. Let it go to voicemail. If it’s the dealer, plan a cross country road trip and get the message when you return.

        In this age of telemarketers, donation whores and other annoying pests, do anyone actually pick up the phone anymore?

    • 0 avatar

      As a person who sells mortgage loans, I can honestly say, today’s dealerships have some of the worst salesmen and financing departments I’ve ever seen. that’s why I love going to buy cars with my friends because I do my best to be an absolute annoyance to these scumbags.

      • 0 avatar
        nrd515

        A friend of mine is a master at making salespeople squirm like the worms that they are. I went with him to buy a truck a year or so ago for his parapalegic brother. By the time the deal was made for a 2WD F150 with some handicap add-ons, the sales guy, who seemed to be on an ego trip at the beginning, was so PO’ed, I could see his carotid artery in his neck pulsating like he was going to stroke out, and he looked like he was getting short of breath. Last time I saw that, it was a guy who had just snorted a large amount of cocaine. I was trying to keep from laughing near the end of it. He was smiling on the outside, dying on the inside. His eyes looked like my dog’s do when her allergies are in full force. Every time something would be disputed, he would say, “Oh man, all I’m trying to do is make my brother who has been in an f’ing wheelchair since 1971 happy!”. Even the biggest slimeball sales guy couldn’t really take it.

        After the deal was made, the guy took us to the finance guy, who he went to school with, and it was uneventful. He told the guy that the salesman probably “hates my guts”, and the finance guy says, “Bill, did you screw with him like you did when you bought that TV 25 years ago?”. He was famous at his high school for that one, the poor woman who sold him a TV had a meltdown, and ran into the back room, crying just as he was about to finally make the deal. Yeah, Bill screwed with him. I wish I could do it. He’s not educated, but he’s not stupid in any way.

  • avatar
    krhodes1

    Why would you NOT go into the dealership with your own financing all sorted out beforehand? Then if they want the financing business, they will have to work for it. This time around my Credit Union could not touch BMW’s offer, but last time Saab could not beat the CU.

    It completely baffles me that most people seem to make the second most expensive purchase of their life completely on a whim with no preparation.

    • 0 avatar
      dts187

      I would think most folks who head into a dealer without arranging their own financing are those who don’t have the credit to get it on their own. A lot of the time a dealer has relationships and access that Johnny Badcredit does not and can work something out. I’ve known some people who have picked up cars from the local “We finance anyone” lots with APRs in the low 20′s over 6 years on used Cobalts and HHRs.

      But I’m with you krhodes1, I love my credit union and getting the account is one of the best decisions I’ve made.

      • 0 avatar
        chuckrs

        Unless the manufacturer has a credit deal on, a CU is the way to go. Avoids the dealer F&I people entirely. And if you are stretching for a car financially, the IIHS tables on injury, theft and repair costs may steer you away from an insurance money pit. I have in the past obtained quotes from an agent for a few cars I shopped.

  • avatar
    wstarvingteacher

    If you had a trade in vehicle what happened to it? I suppose they say it’s been crushed and you can’t get it back.

    I bought a car like this once but had no problem. There was no trade in so I think I would have demanded my money back and if I couldn’t have got it, just walk away. Seems like justification for a homicide.

    • 0 avatar
      Flybrian

      In my experience (Florida), if your trade-in has been sold, you must be reimbursed the trade-in value given by the dealership. That’s real fun when you overallow (say, $3500 for a $750 car) to make a deal.

      We’ve had cases where we’ve purchased cars from a local Ford/Mitsubishi store that does lots of subprime (but doesn’t do it well) wholesale only to have to return the units a week or so after picking them up because the deal was unwound on their end.

      That’s why I never offer any trade for retail/wholesale before the deal is clear, ESPECIALLY subprime.

  • avatar
    lw

    A car dealer does something shady? SHOCKING!

    I have great credit/income and I still don’t like taking a car home until the financing is done.

    My last experience was downright interesting…

    1) I go to dealer, pick out the car I need.. (note NEED, not want.. I had a specific purpose in mind) No trade-in.
    2) They run my credit, we work out the deal. The financing is set, but it’s late on a Friday so I know it’s not really all done until 74 computers in India all sync up by close of business Monday or Tuesday.
    3) The sales manager comes out to thank me and offers an even better deal if I will buy 2nd new vehicle
    4) I decline, but I do end up driving the new vehicle home
    5) The next day I get the call.. There was a problem with the financing, we overcharged you $900 and need to redo the paperwork to lower your payment….
    6) I’m there in a couple hours with a smile on my face

    How bout them apples!

  • avatar

    Can’t really help not caring for Lincoln dealers.

  • avatar
    Landcrusher

    “I think this is some malicious scam you planned the whole time. If you aren’t some sort of sociopath, how do you sleep at night? Even if you are, you have millions of dollars worth of inventory sitting outside in the open.”

    Long Pause

    “You shouldn’t treat people like this.”

    Long Pause

    “I am leaving this office so you can reconsider. We can start over when I come back.”

    Leave.

  • avatar
    OldandSlow

    krhodes1 – That is spot on advice. My credit union is so much easier to deal with, too.

    I read the article and I’m rather curious, if the majority of yo-yo financing scams are legit. Unless the place is very busy, dealing with my credit union takes less than an hour and whatever terms we agree to are final.

    • 0 avatar
      lw

      Credit Unions? A LOT of people don’t even have a checking account, let alone a relationship with a credit union.

      Pay day lenders and Wal-Marts serve as banks for millions of people.

    • 0 avatar
      dts187

      +1 on a credit union being easy to deal with. Last car purchase I made I got everything sorted out over the phone in under 15 minutes.

      • 0 avatar
        Educator(of teachers)Dan

        Yeah my Credit Union has caused me to leave other sources of financing for dead. Especially since the CU will let me pay my loan once a week, or twice a month, or once a month whatever fits my life.

        I’m looking at you Wells Fargo… you can kiss my

  • avatar
    redliner

    It is indeed sad that the vast majority of the people being screwed are the one that can least afford it. The single mom, the struggling student, the indebted everyday Joe… These are the people that are going through this. People with just a little more forethought usually get stuff like this sorted out before they go to the dealer, and typically, those people are much better off to begin with.

    • 0 avatar
      Secret Hi5

      Not to mention the elderly who are not wise to the ways of the latest scams.

      Is it society’s responsibility to protect the vulnerable population who are technically legally competent, but for some reason just aren’t savvy? Or is it survival of the fittest?

      • 0 avatar
        stuki

        It certainly isn’t “society”‘s job to, in addition to letting the poor be scammed by the above kind of sleazeballs; also rob them blindly to pay for a bunch of overpaid tax feeders pretending to protect them from some scary bogeyman.

        And seriously, the dealer is actually the one at risk from this arrangement; as he is the one out the car. If the “buyer” don’t agree to the less generous terms; just walk away. In general, regular people need to be more attuned to their flippant self. Otherwise, the “nice guys”, those “doing the right thing”, WILL be screwed over by those who don’t. And if the law needs to change somehow, it should be in the direction of LESS protection offered to sleazeballs when one of their victims decides he has had enough. And decides to strangle the scum or something.

        The way things are laid out now, the “poor” (that’d be underlawyered), is at a severe disadvantage, since all inexpensive means of dispute resolution are outlawed (wouldn’t want people to be able to settle their conflicts without politically connected lawyers and tax feeders getting a cut of the action, you know.)

  • avatar
    Felix Hoenikker

    Sounds like what VW did with the new Jetta base engine for $16K. Very few stocked and very few sold. It’s a pure marketing ploy to get people in the door. Then comes the upsell.

    • 0 avatar
      stryker1

      I would strongly disagree with that equivocation. the upsell is not nearly as shady as extortion, which is effectively what yo-yo financing is.

  • avatar
    LeMansteve

    …so the guy bought a truck but didn’t know what the price (financing) was? Sorry, that’s just asking for all sorts of trouble. Unfortunately it probably happens every day to people born without some key brain cells.

    Where else can you walk in, buy something, take it home with you – but not know how much it costs?

  • avatar
    Conslaw

    If you have a car dealer make you sign a document called a “spot delivery rider (or waiver)”, run away.

    Most consumer lawyers think spot delivery is an inherently illegal practice, but judges haven’t been consistent in agreement. If you are the victim of a spot delivery sale, talk to a consumer lawyer. You can find one in your area that handles automobile cases by going to the National Association of Consumer Advocates website, http://www.naca.net.

    Don’t let them bully you into returning the car until you’ve talked to a lawyer. Lock the car up in a garage. FYI the most common fallback that the dealers give for the reason financing was denied is that the consumer lied on the credit application. I’ve had a false credit application kill an otherwise good offensive case for a deceptive yo-yo sale. Don’t lie on the application!

    Finally, I want to add that the most common victims of yo-yo sales are minorities, young women and senior citizens. If you suspect that you were treated differently due to your gender race or nationality, you can file a claim with your state’s civil rights commission.

  • avatar
    Philosophil

    I always make sure I have pre-approved financing before speaking to any dealer. When it comes to this kind of transaction, the normal rules associated with ‘trust,’ ‘principles of generosity,’ and so on are put on hold until the transaction is formally complete.

  • avatar
    Conslaw

    @Philosophil

    The problem with Yo-Yo sales is that the consumer is led to believe that the financing has been completed. The consumer leaves with a signed installment sales contract and even an odometer disclosure. You can avoid yo-yo sales by arranging your own financing outside of the lender if you have decent credit. If you have no credit or bad credit, you might have to rely on the dealer for financing.

    Here’s a link to the Federal Trade Commission’s report on yo-yo sales.
    http://www.ftc.gov/os/comments/motorvehicleroundtable/00104-82860.pdf

    • 0 avatar
      Philosophil

      Thanks for pointing that out. If true, then this makes the practice even more insidious than it already was. As I said before, this kind of stuff is borderline psychopathic.

  • avatar
    tankinbeans

    I think something like this happened to my mom a number of years ago. She’d bought an old Lanos, that was billed as a “demo car,” but was in fact a repossession for twice what is was worth. At the time she’d needed a car and didn’t really have a choice – the owner of the dealership now serving time for defrauding customers, failing to pay Chrysler Financial for floorplan, and other scummy behaviour (you all can guess who I’m talking about) – and she bought gap coverage.

    Long story short, the car was wrecked (after she’d spent 6 months trying to get the registration renewed due to titling issues on the part of the dealer), GAP didn’t cover the overage from the insurance, and the dealer from whom she’d bought the Lanos was the only one willing to deal with her on a different car. She bought a used Sunfire, drove it home, and then about a week later got a call saying they needed an extra $1,000 down payment on top of what she’d already given them.

    Interestingly, after she’d fought to get this Lanos written off properly she got a notice that the loan had been paid-in-full, but we couldn’t figure out how it happened.

    She readily admits that she has poor credit, but has been trying like h-e-double hockey sticks to improve it after a rather nasty separation 14 years ago.

    • 0 avatar
      Conslaw

      @tankinbeans

      Your mother may have been victimized by the fiance company in another way. It sounds like she had some pretty decent claims (counterclaims/defenses) against the dealer. It also sounds like the dealer arranged the financing with the lending company. Under the FTC credit practices rule (also called the FTC holders rule), when the seller finances the deal or is involved in obtaining financing with an outside lender, the outside lender is subject to any claims or defenses that could be raised against the seller.

    • 0 avatar
      Conslaw

      For the 20 years that I’ve been involved in consumer law, we’ve been waiting for the FTC to take a hard and fast stand on yo-yo sales. The FTC has been wishy-washy at best. There are now some signs of strengthening resolve at the FTC. I think a lot of it is coming from the fact that the FTC has lost/is losing a lot of its regulatory authority to the new Consumer Financial Protection Bureau. Authority over auto contracts is one of the few big areas where the FTC retains authority.

  • avatar
    NulloModo

    There are a few different reasons why financing may fall through or a car may need to be returned, and I wouldn’t call the majority of them ‘scams’. 

    In almost any case the dealer does not want a deal to have to be unwound. The dealer doesn’t make any money if the deal doesn’t go through, and now has a new car to be put back in inventory that has extra miles from being in the customer’s possession as well as all of the charges for the detail, fuel, etc. 

    If a dealer is putting out a car on terms they know they can’t reach in hopes of renegotiating at a higher interest rate later on through either hoping the customer has fallen in love with the car or through holding the trade and/or down payment hostage, I agree, that’s a scam, and that shouldn’t happen. 

    Most often when the financing can’t be arranged though it’s due to omissions or false statements on the credit application, an inability on the part of the customer to provide documents required by the bank such as proof of income or residence, or down payment money that isn’t produced as promised.  Even if everything is on the up and up there is a chance a bank won’t bite, but I do agree it should be disclosed at time of sale that the car is being released under terms that are expected to be obtained, but may not be final.  

    The reason dealers do spot deliveries in these cases is that the same people who have poor credit are also likely to have poor impulse control.  If that customer is sent on their way without the car while the finance manager tries to get the deal approved there is a good chance that customer will just  go down the road and buy something at the next dealer if they are willing to spot them a car.  

    If the deal falls through with no intentions to defraud on the part of the dealer, I don’t see what’s wrong with this.  Sure, the customer had some time wasted, but so did everyone working with that customer at the dealership.  The dealer wants to sell cars and make money, there is no benefit to raising up someone’s hopes and then dashing them.   If the deal falls through the customer brings back the car, they get back their trade and/or down payment, and it’s like it never happened.   It’s a last resort option, but if the customer’s credit won’t support a loan or a loan that the customer will accept there is no other option.  

  • avatar
    "scarey"

    I don’t understand. If the sales contract has been signed, how can it be cancelled ? If the seller and buyer have agreed to a sale, at an agreed upon price, isn’t it the seller’s problem if the financing falls through ? And isn’t it his job to get the deal financed ?

  • avatar
    Conslaw

    I’ll shut up after this post. I just want to mention that the FTC is requesting public comment on issues regarding auto sales and financing. They are considering making new rules governing deceptive practices in the industry. If you have a comment you want to make to the FTC, check out this link. http://www.ftc.gov/opa/2012/02/motorvehicle.shtm

  • avatar
    MeaCulpa

    So, this situation seems basically non existing in my part of Europe, new cars are generally not sold in the same way as in the US and for used cars the granting of credit seems more efficient here (credit scoring is not used at all) at least regarding the required time frame. Well, now I wounder what interest does one pay as an average guy on an average car loan in the US? Minimum money down? Whats’s the rate for a car loan from a bank versus dealer/manufacturer? What does a loan with real estate as collateral cost?

    • 0 avatar
      dts187

      I can give you some of the info based on my experience as I make an average salary with average credit. My situation:

      Mid-20′s (somewhat limited credit history), annual income between 60-70k, average credit score.

      My last car loan in 2008 was 5.6% APR on a 36 month loan with 10% of purchase price as a down payment. I’m currently looking to purchase my first completely new car and have been approved for 4.9% on a 60 month loan with 20% down. With my credit score not being the best (stupid college decisions) I don’t qualify for a lot of good rates from the dealer. I tested the waters and saw between 8 and 10%.

      I’ve never heard of or known anyone using real estate as collateral for a car loan in the US.

      • 0 avatar
        MeaCulpa

        Thanks for the info. I phrased my statement wrong, what I meant was not using the house as a collateral Vis-à-vis a finance company but rater taking, or expanding, your mortgage. This practice might be a bit hard to pull in the current US/EU housing market and maybe due to new demands on capital ratios courtesy of Basel III.

        That seems in line with the rates advertised over here with 0-20 percent down, you would expect to land at 4,5-5 percent (maybe less if you like haggling and has a solid income/savings), but 10% OUCH!

      • 0 avatar
        replica

        30, 40k a year, high 600′s score. I was offered 72 months at 4.9% two months ago. $1k down.

      • 0 avatar
        redav

        MeaCulpa, that’s simply a home equity loan, which have severely dropped in popularity because:
        - falling housing values reduce equity and thus what you can borrow
        - banks are more wary of lending because they don’t want to be burned
        - people have seen what happened to others and don’t want it to happen to them (that’s probably not a negative)

        I don’t know the rates on equity loans, but they will be higher than regular mortgages, which are in the 4s right now IIRC. So a equity loan in the 5s or 6s seems reasonable.

        Another possibility is a full refinance. Considering the fees associated with that, it really doesn’t make sense for a way to finance a car. But if you are going to refinance anyway, it might be a good option to pull some money out for the car.

        As a matter of principle, I do not like the idea of using a mortgage / home equity vehicle for buying a car. If you have problems paying off a car loan, you lose the car. If you have problems paying a home loan, you lose the home. As long as car loans with reasonable terms are readily available, that’s the right tool for the job.

        Actually, I’m a big fan of keeping the car for much longer than the loan and using the extra time to pay yourself the car note, thus enabling you to pay cash (or take out a very small loan) for the next purchase.

  • avatar
    Conslaw

    Per Bankrate.com a 48 month new car loan is going for about 3.28% APR (annual percentage rate) interest. Downpayments will vary from lender to lender, but downpayment requirements are fairly low in the US.

    Per the same source, 30 year fixed mortgage rate is 3.79%. If you have less than 20% of the appraised value to put down, you will have to purchase some form of mortgage insurance at an additional charge.

    • 0 avatar
      MeaCulpa

      Thanks. Rates seems quite low, my recollection is that we used to have substantially lower rates on our side of the pond, but that doesn’t seem to be the case anymore.

  • avatar
    replica

    I had this happen to me. I bought a used Civic. We did the buyer’s contract and everything. So I take the car home and assume it’s a done deal. I get a call about 30 days later telling me the financing fell through and I need to come sign a different deal and add a co-signer. My credit is reasonable, as is my debt-to-income ratio so this made no sense. I promptly came in, threw them the keys and ask for my trade-in back so I can get home. They had sold the car I traded in and they offered me the trade in value. I told them it wasn’t a trade-in because nothing was traded, they failed to sell me a car at the terms agreed by both parties. I talked a few more bucks out of them since this was just a sale now and not a trade. They cut me a check and I had someone come pick me up. I absolutely wasn’t going to sign another deal at a higher interest rate. This was at Clear Lake Lexus, just outside of Houston.

  • avatar
    Jerith

    So a story from the other side of the desk. Canada though. Still some similarities.

    The customer lies or just doesn’t understand the requests. Things like insisting they are the director of the company of the 3rd party cheque they insists worked ‘last time’ as the account to have payments come from. They may be approved signers but the bank has made regulations changes to protect the consumer from fraud so rules are tightened. The same thing with dual lined cheques. Anyone can steal a voided cheque.

    A application can be truly approved. But the bank buying the contract is something else. Some banks will accept fax submissions of the contracts for buying. Some want you to mail in all the documents. They then start sending ‘Unable to approve, conditions noted.’ This is where additional docs are needed and the call is made.

    I’ve never had to ask for the truck or car back but I have had to remind people about their obligations. I DO need a copy of the insurance or registration as required by the bank. The customer signed that they will be provided in a reasonable time limit. If they don’t provide it the dealer is the jerk?

    The 3rd party cheque recently happened to me on the 1st of May. It was all solved by just getting a personal cheque for their account. Had to convince the farmer about it and how he lives off the farm business but for whatever tax or workers comp reasons the wife is the owner in his situation.

    But this directly looks like a yo-yo deal. The customer and the dealer just wasn’t ready to follow ALL the rules that used to be more lax. Hence the call. The approval and sale is supposed to be done in good faith from each side of the deal. The banks can be the string on the yo-yo which is the first part that snaps. The dealer and customer can both be let down by the bank for various reasons.

    So protect yourself with getting copies of the refusal and all the smart tactics mentioned in above posts. Get ALL the documents you put your name on, or what has your name on it. READ that stuff. Three pages of contact-speak wouldn’t be that hard to go over and at least get an idea of the contract you just entered. They also show the protections for the consumer.

    Makes me wonder if the Zero-Down aspect was never created would we all be in better positions.

    Comments? This is just one view based on experience.

  • avatar
    APaGttH

    Here is an idea.

    Live within your means, pay your bills unless it is coming down between eating and starving, and don’t be financing a car when you have bad credit to begin with (Hello, that’s part of the problem).

    • 0 avatar
      replica

      It doesn’t have anything to do with bad credit or a terrible DTI ratio. The article, I think, is talking about how dealers game their customers to pay higher interest rates, regardless of credit.

      • 0 avatar
        Jerith

        That is the idea ‘eh? Calling them back to RE-negotiate. Not just complete the deal. Renegotiating rate or new required deposit needed. That could be used to buy down the lending rate to look like it is still the same rate but behind it the down payment was used to boost the rate but keep the payment the same.

        I’m guessing that the customer is happy to get to keep the car and the thing they take away is the payment and term is still the same. The down payment vanishes and is sucked in by the total interest cost of the car but not moving payments. Just hiding behind a rate buy-down which gives a higher reserve. Maybe 1.5% back to the dealer. That $450 increase -may- be the incentive for those more-than-shady dealers.

        Hiding dealer rate buy-downs on customers are not allowed for posted bank rates. Other lending entities may be regulated differently. Rate buy-downs are illegal in some situations.

  • avatar
    Conslaw

    Under US law, when the dealer finances the car, the credit document involved is a retail installment sales contract or RISC. (When you finance through a third party, between you and the dealer, you may just have an “order agreement; but between you and your lender, but you’ll sign a promissory note with your lender which will have all the disclosure, and you’ll give your lender a lien on the vehicle.) The dealer is required to give truth-in-lending disclosures to the consumer in a form he/she can keep before the consumer is obligated on the contract. When this TILA disclosure is contradicted by later disclosure, the first disclosure is inaccurate, and is arguably in violation of the law. In a RISC, the dealer agrees to sell the car to the consumer in exchange for the consumer making a series of payments as reflected on the contract. Under the terms of the typical pre-printed RISC, both the seller and the consumer are bound. It is custom for the dealer to assign the right to payments under the RISC to a third party finance company. There is no obligation for the dealer to do so. When dealers treat these contracts as contingent upon third party assignment, it raises a lot of thorny questions regarding the date of contract formation and the appropriate dates for odometer and interest disclosure. For example, when should the interest clock start running if the contract remains contingent on dealer asignment? If I haven’t bought the car yet, why should I pay interest?

  • avatar
    Conslaw

    Under US law, when the dealer finances the car, the credit document involved is a retail installment sales contract or RISC. (When you finance through a third party, between you and the dealer, you may just have an “order agreement; but between you and your lender, but you’ll sign a promissory note with your lender which will have all the disclosure, and you’ll give your lender a lien on the vehicle.) The dealer is required to give truth-in-lending disclosures to the consumer in a form he/she can keep before the consumer is obligated on the contract. When this TILA disclosure is contradicted by later disclosure, the first disclosure is inaccurate, and is arguably in violation of the law. In a RISC, the dealer agrees to sell the car to the consumer in exchange for the consumer making a series of payments as reflected on the contract. Under the terms of the typical pre-printed RISC, both the seller and the consumer are bound. It is custom for the dealer to assign the right to payments under the RISC to a third party finance company. There is no obligation for the dealer to do so. When dealers treat these contracts as contingent upon third party assignment, it raises a lot of thorny questions regarding the date of contract formation and the appropriate dates for odometer and interest disclosure. For example, when should the interest clock start running if the contract remains contingent on dealer assignment? If I haven’t bought the car yet, why should I pay interest?

  • avatar
    John

    Bring the vehicle back to the dealer, say you’re sorry the financing didn’t go through. Forget to mention you sawed an old steel pipe with a hacksaw, collected the saw “dust” with a piece of newspaper, and put some down the oil fill hole, the rest down the transmission.

  • avatar
    golden2husky

    And to think people were upset yesterday when SM posted a story about lying to an Aston Martin dealer about his net worth…

  • avatar
    chicagoland

    “In almost any case the dealer does not want a deal to have to be unwound.” – NulloModo

    True, with reputable new car shops. ‘Yo-yo’ is more likely with used cars, which can be taken back and resold. It would be risky for a dealer, with a new car, as ‘NulloModo’ stated. It would have to be sold as ‘used’ for less $.

  • avatar
    jpolicke

    If the dealer is trying to renegotiate the payments upward from the original terms, what he needs is more motivation. I suggest explaining that he has an hour to call you back and inform you that the “problem” has been all worked out and the terms will stay the same, or you are going out to conduct research to determine exactly how far a vehicle that he still owns can be driven without any oil in the engine. You’ll call him to let him know where to pick up his vehicle.


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