The Yo Yo sale, so named because a car dealer will pull a consumer back to the dealership (as if they are on a yo yo string), happens when:
- the consumer purchases a new or used vehicle and finances at least part of the purchase.
- the consumer signs paperwork, including a retail installment sales contract, financing agreement, disclosure statement, etc.
- the consumer leaves the lot with his/her new vehicle (usually with temporary tags in place).
- Some time later, generally 5 to 30 days, the dealership will call the consumer and say, “there’s a problem…”
Typically, the “problem” is that the financing has “fallen through,” but the consumer can make a new deal with the dealership and keep the car if he/she will pay a larger down payment, approve a higher interest rate, find a co-signer, or other types of payments that decrease the value for the customer and increase the profit for the dealership.
You can see a hidden camera video of this typical conversation Here.
Why Are Yo Yo Sales Scams So Effective?
The Yo Yo sale is emotionally devastating. Purchasing a vehicle is a huge event in peoples’ lives. It is generally the largest or second largest purchase a person makes. A new (or new to you) vehicle purchase can be a great source of pride. Typically, the first thing a person will do after purchasing a new vehicle is show it to their friends and family. When the dealership calls and says that the car must be returned, consumers typically experience embarrassment and shame. What will their friends and family think? People will ask questions when that new car isn’t around anymore.
Additionally, the Yo Yo is often paired with another type of scam (sometimes called Unhorsing) that gives the consumer a double whammy. Many times the dealer will say, “I’ve already sold your trade in.” Now, the consumer feels there is no going back.
Even worse, the dealers can make a number of intimidating threats if the consumer senses something unfair or illegal is happening and does not agree to the dealer’s terms.
- Dealers will threaten to report the car stolen or call the police
- Dealers will threaten to repossess the vehicle and destroy the consumer’s credit
- Dealers will threaten to call the consumer’s employer and say he/she is a deadbeat
Of course, the Yo Yo isn’t anything to be embarrassed about – it is just a scam. The deal isn’t falling through because the finance company backed out, or anything like that. The deal is “falling through” because the dealership is predatory.
This scam is particularly effective against the most vulnerable. People who need the most financing and have to have a vehicle to get to work, doctor’s appointments, or other pressing daily issues.
The Yo Yo scam is effective for many of the same reasons that all dealership scams are effective: experience deficit and high pressure tactics. Most people will purchase a car fewer than ten times in their life. But a dealer will generally be able to sell more than ten cars in a month. Many dealerships can sell ten cars in a weekend. Dealerships have more experience and more comfort in the dealings than the average consumer. Moreover, most people do not have experience scamming, but a dirty car dealer might have scammed someone the exact same way three times this week. The dealer will have slick answers for every question because they have done it before.
What is Really Going on Behind the Scenes?
In my opinion, there are two types of Yo Yo sales: premeditated and shopped.
Premeditated Yo Yo sales are sales where the dealership intends to Yo Yo the customer from the very beginning. What happens with financing is irrelevant. The dealer thinks that there is vulnerable prey in front of them and intends to squeeze every last drop from the consumer.
Shopped Yo Yos are different. Many times the dealership will agree on a particular financing arrangement with a consumer, but not necessarily on who the financier will be. The dealership will then call several finance companies and “shop” the deal. This deal will inevitably include some form of compensation for the dealer. Either in straight cash payment, splitting a portion of the interest payments, or some other form of kickback. Sometimes though, the dealer cannot find a partner that will pay the dealer what they want. So, the dealership will call the consumer back in, and change the terms of the deal to make it more favorable for the dealership.
Combating Yo Yo Sales
There are two stages to combating Yo Yo sales: stopping the Yo Yo before it starts and dealing with the Yo Yo once you are in the middle. My Jiu Jitsu teachers have always taught me that the best time to defend against an opponent’s attack is in the earliest stage. It is better to deny the possibility of an attack than to try to fight the attack late in the game.
In the early going:
- If possible, pay cash (read Check or Money Order) in any car deal.
- If you need financing, arrange the financing yourself. You can get financing from your bank, credit union, or finance companies like Wells Fargo without a car dealership intervening.
- Do not take the dealership up on an offer of “spot-delivery.” If the dealer says that the financing is not completed, do not take the car home. (Most dealers will fail to mention this though)
If a dealership calls you and tells you to return your vehicle:
- Call a lawyer
- If you go to the dealership, have a friend take you. You made need a ride, and you will definitely need a witness
- If the dealership tells you the deal has fallen through, say fine. Give the dealer the keys back and demand your trade in be returned to you immediately if applicable. Demand your down payment back too.
- If the dealer tries to intimidate you, you can always leave and sort it out later with legal counsel.
- Demand that the dealer put in writing why you were turned down for financing. If you know the finance company, call them and ask for a letter stating if they were ever asked to extend credit, whether or not they extended credit or denied you, and if you were denied why.
- Remember to clean the car out before you go. You don’t want any personal possessions there if the dealer takes the car back. Ensure that you get all of the paperwork out of the vehicle.
The car market in the United States is slumping, and many dealers are turning to underhanded tactics like Yo Yo sales in order to boost profits. Its important for consumers and lawyers to know the signs of a Yo Yo in order to avoid becoming a victim. If you have been the victim of this scam, call a lawyer.