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Buying a Car from a Dealership? Beware Yo-Yo Financing Scams Like This

October 3rd, 2016 · No Comments · Auto Loans

by Kristy Welsh

(Last Updated On: February 26, 2018)

Buying a Car from a Dealership? Beware Yo-Yo Financing ScamsWhen you don’t have the best of credit, you expect to pay a higher down payment and interest rate for an auto loan. What you don’t expect is being told they want more money after you’ve already signed the contract and driven the car off the lot. Yet, that is exactly what the FTC says consumers found themselves faced with when doing business with Sage Auto Group in Los Angeles.

About Yo-Yo Financing

“Spot delivery” – or selling you a car “on the spot” before financing is complete – is legal (though laws vary by state). What’s not legal is for a dealership to abuse spot delivery via a “yo-yo financing” scam.

Here’s the gist of it.

You sign a contract agreeing to a specific interest rate and down payment or trade-in. You leave the dealership with the car thinking it’s a done deal. It’s not. Before you know it, the dealership calls to let you know the original financing didn’t go through. The only way to keep the car is to come back in and sign a new contract with (you guessed it) a higher down payment and interest rate.

The FTC says Sage Auto Group – owned by three brothers who operate several dealerships in L.A. – not only engaged in a yo-yo-financing scam, but also:

  • Threatened consumers with repossession, arrest, and criminal prosecution if they did not agree to the terms of the new contract
  • Tacked extra charges onto the financed amount – like extended warranties and service plans – either without consumer knowledge or by claiming they were free or required by law (neither of which was true)
  • Created phony online reviews to combat all of the negative ones Sage Auto was receiving from real customers

For these alleged violations, the FTC is seeking a court order requiring the dealership cease these unlawful activities and issue refunds.

How to Protect Yourself

1) If you have subprime credit, try and improve it before applying for an auto loan. Learn how to repair your own credit with our free resources.

2) Try to get a loan through a bank or credit union first. Financing through a dealership should be a last resort.

3) Take your time. Visit different dealerships, research the car you want, and wait for the financing to come through.

4) Read the FTC’s free publications on buying a car.

5) If you believe you have been a victim of a yo-yo financing scam, consult with an attorney and submit a complaint to the FTC.

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