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Don’t Be a Victim of Yo-Yo Financing

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When it comes to buying a car, consumers need to be careful to avoid car dealers who are willing to pull shady sales tactics on unsuspecting shoppers. There are schemes that you need to look out for, but one of the worst is yo-yo financing. Whether visiting any number of luxury car dealers or bad credit car dealers, the risk is real and knowing what to look for can protect you the consumer from entering into a bad deal.

How It Works

Yo-yo financing is most often used by car dealers to take advantage of those who walk through their doors with bad credit. These buyers are already limited to what the car dealer will approve them for, and thus more vulnerable to fall for a yo-yo financing scheme.
The way it works is that a customer is sold a car before financing has been finalized. The unlucky victim takes their car home thinking that they have been approved for a loan with a reasonable interest rate. However, the loan has only been preliminary approved. The lender who makes the final decision has not actually approved the loan yet. But this doesn’t stop the shady car dealer from sending the unsuspecting victim home with the car thinking that everything is taken care of.
Within a few days, the loan will be voided. The dealership will inform the victim that they need to bring the car back, which is where the yo-yo aspect comes in. When the victim comes back to the dealership, they learn that they will have to renegotiate the terms of the loan, pay extra fees, and sign new papers for a loan that could possibly carry a much higher interest rate. If the buyer is unwilling or unable to pay the higher interest rate and extra fees, the car must then be relinquished back to the dealership.

What to Look Out For

One thing you need to look out for is loans that are approved too quickly. If the dealer tries to send you home with something called “spot financing” or “spot delivery” then you need to look for your next car elsewhere. Reputable bad credit car dealers will never let buyers leave the lot until the deal has been approved completely.
You need to make sure that all the papers are signed and that everything has been approved before you take possession of the vehicle. If it seems too good to be true, it probably is. Being aware of the dangers of yo-yo financing will get you one step closer to the car of your dreams.