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Don’t Get Put on the Spot: Your Guide to “Yo-Yo” or Spot Delivery Financing

You really need a new car but your credit isn’t the greatest. Therefore, your relief is enormous when the dealer pushes a sales contract across the desk towards you. You sign it and take the car home, but several days later, the dealer calls to advise that the financing fell through and you have to either return the car or sign a new agreement at a much higher interest rate.

This is a bait and switch tactic known as “yo-yo financing.” The dealer assures a consumer with shaky credit that they are approved for a loan at a certain interest rate and term, but knows there is no way the buyer will ever qualify for those terms and conditions. They let the person take the vehicle home, but call them back to the dealership soon afterwards to sign a new contract that calls for more fees, higher interest rates, and even a larger down payment. This ploy is also known as spot delivery financing because the cars are sold “on the spot” without waiting for financing to be complete.

Here are some signs that you may be getting that dreaded “callback”:

  1. The sales contract belies your credit status. If you are offered highly favorable terms that you know you won’t normally qualify for, be wary, as it’s practically a given that the financing will fall through.
  2. The dealer encourages you to take the car home prior to financing approval. With spot delivery financing, a dealer is trying to remove a buyer from the market until they’ve had enough time to work out a deal with the lender. When a dealer lets you take the vehicle knowing that you’d be called back to sign a different agreement, it becomes an active scam.
  3. There is a special contract addendum. With spot buying scams, you are typically asked to sign a contract addendum, or conditional sale rider, indicating that the sale doesn’t close until the dealer gets financing approval.
  4. You are not immediately notified that financing fell through. Many victims of yo-yo financing drive their new car for weeks and even months before they’re forced to return to the dealership because of a “paperwork problem” or because “your financing fell through.” Scammers want you to become emotionally attached to the vehicle, so that you’ll agree to unfavorable terms to keep it.

In extreme cases, when you object to the new arrangement, the dealer may say that your trade-in was sold, so that refusal leaves you without a vehicle. They may even try to intimidate you by threatening to call the police and report the car stolen.  

The best way to avoid becoming a victim of a spot delivery scam is to arrange your own financing before visiting a car dealership. If the dealer tries to persuade you to use their in-house financing resources or require a bigger down payment, refuse to sign.

If you did not have pre-arranged financing and the dealer attempts a yo-yo financing tactic, you can return the car for a refund of your deposit and return of your trade-in, if applicable. Since the dealer essentially loaned the vehicle to you, any wear and tear is their problem, not yours.

If you purchased a new car in Missouri and the dealership is now trying to get you to sign a new, higher-cost financing agreement, contact consumer protection attorney Bryce Bell at Bell Law today. Mr. Bell will review your circumstances, advise you on your legal rights, and help you protect them.

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