Written by attorney David L. Friedman

Stupid Car Dealer Tricks: The Yo-Yo Financing Scam

Here's how the scam works: You go car shopping, you fall in love with a car, and you agree on a price. The dealer is offering 1.9 percent financing, so you take it. You cruise off the lot, just relieved that you won't have to talk to any more car dealers for a while.

A few days later, the dealer calls you back to tell you that your financing was turned down and that you’ll need to come back to the dealership. When you get there, the dealer says that because of your credit rating, you can still have the loan, but at a higher interest rate or for a higher down payment. When you refuse, the dealer turns up the heat–telling you that your trade-in has already been sold, or that they’ll have to repossess your new car, or they’ll report the new car as stolen unless you give it back.

This is the yo-yo scam. When you signed your original loan papers, you might have missed a sneaky contract clause that said the deal was “subject to" or “contingent on" final approval. It’s the ultimate pressure game–once you’ve driven the car a few days, programmed your favorite radio stations and broken in the seats, you’re much more likely to do whatever the dealer says to keep this car.

How to spot this scam:

  • Make sure that any loan contract you sign is final. If you see those weasel words “subject to final approval"–just walk away.
  • Avoid car dealer financing altogether. Separate your car purchase from your financing–an independent bank or credit union has much less incentive to rip you off. Car dealers have gotten good at using financing tricks to drive their sales. Don’t let them.
  • If you’ve been victimized by this scam, contact an attorney right away

Free Q&A with lawyers in your area

Can’t find what you’re looking for?

Post a free question on our public forum.

Ask a Question

- or -

Search for lawyers by reviews and ratings.

Find a Lawyer