Don't Fall For The Yo-Yo Financing Scam

Bertel Schmitt
by Bertel Schmitt

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, “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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2 of 53 comments
  • Chicagoland Chicagoland on May 08, 2012

    "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 $.

  • Jpolicke Jpolicke on May 09, 2012

    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.

  • Master Baiter "...but the driver must be ready to step in and take control. The system is authorized for use during the day but at speeds lower than 40 mph..."Translation: It's basically useless, and likely more stressful than piloting the car ones's self.
  • Alan My friend has a Toyota Kluger (made in 'murica). A Highlander. These things are based on a Camry platform. I have driven the Kluger we had at work and I find them quite boring even for a SUV. An appliance. I hope this will deliver some driving pleasure. I found the Camry a better boring vehicle.
  • Alan Most Lexii look good to reasonable.....................until you see the front ends with their awkward grilles. It actually would look normal on a GWM, LDV or any other Chinese vehicle.
  • Tassos These last months, every day seems to be another great, consequential piece of news for Tesla, who does not just DOMINATE, it OWNS the US and FREE WORLD BEV market.It is the ONLY (repeat ONLY) maker that builds its huge best sellers at a PROFIT, ie, SUSTAINABLY. FOrd EV is bleeding 3 billion in losses. GM hides theirs, and I bet they are even HIGHER. VW has spent a huge no of billions and its ID series has been an UTTER FAILURE.Toyota, already 12 years too late, is yet to try. I doubt they will succeed to dethrone TESLA.
  • Tassos Again: I never took VOlvo seriously in the last 20 or so years.Chinese Volvo-Geely has a dizzying number of models, I have lost count how many,YET its sales and market share in the US has always been DISMAL these last 20 years.It ranges from a pathetic 0.5% to 0.8% of the US market.For comparison, Toyota has 15% and GM has even more. Tesla has almost 10 TIMES VOlvo's share, with a PITTANCE of really TWO Models, the 3 and the Y, as the S and the X hardly sell any copies any more.So why do we keep reading articles about Stupid VOlvo?Because they have the best PR department of any maker.