Consumers Beware: Don't Let Car Dealers Take You In with a Yo-Yo Auto Sale Scam

Dealers tell consumers they have to return their vehicles unless they pay more or agree to higher Interest Rates

Consumers Beware: Don't Let Car Dealers Take You In with a Yo-Yo Auto Sale Scam
Image: NCCC
August 30, 2018

You've finally filled out all the paperwork for a new or used car and drive it off the lot in triumph. Then, only a few hours (or days or weeks) later, the dealer calls you and tells you that you have to return the car because your financing didn't go through. What's going on?

It's called a yo-yo auto sale

This situation is known as a spot delivery or yo-yo auto sale. Both parties have done everything required by law to sell (or in your case, buy) the car. Then the dealer contacts you and says that you have to bring it back, but that you can still keep it if you pay another fee, accept a higher interest rate, or otherwise fall for some other monetary catch.

where it typically happens

This fraud usually happens at small used car dealerships, though it does also sometimes happen at bigger ones, too. The problem, often related to your credit, is not your fault. Dealers frequently finance the loan through the dealership with the intention of later selling it to a finance company. Sometimes, however, they find out that they won't be making as much on the sale as they had expected or that no finance company will buy the loan for the terms that you originally agreed to.

you'll be pushed hard to sign a new contract

The dealer will try to convince you that in order to keep the car, you have to void the original contract and sign a new one that includes higher fees and a higher interest rate or risk losing your deposit. Dealers often claim that they can't give you your old vehicle back either because it has been auctioned or sold. The dealer more than likely has the car on one of its overflow lots. Dealership personnel may claim that an innocent mistake was made, that they will be fired or that they'll be forced to make up any difference from their paychecks.

tactics used by dealers

Dealerships may tell customers that the contract is cancelled and then keep down payments and trade ins if they refuse to sign a new contract. Some dealers threaten customers with arrest, criminal prosecution, or vehicle repossession if they didn’t take a new deal, even when the original deal is still valid.

What to Do

Remember, you have a legally-binding contract with the dealer. By law, the dealer has to honor that contract just like you do. In many past cases, consumers who have gotten a lawyer and pursued legal actions have almost always won their cases, and they often get settlements between $50,000 and $100,000. So if this happens to you, contact a lawyer immediately and contact the North Carolina Attorney General's Office

Dealerships are now writing 'outs' in their contracts

Some dealers are adding clauses to their contracts that require you to return the vehicle in the event that financing falls through. Even if this situation affects you, contact the North Carolina Attorney General's Officeanyway. Every contract is different and there might be something illegal about this particular clause in your contract.