Consumer groups have issued warnings about American car dealers and a new trend referred to as “yo-yo financing.” Consumers are being told details of tricks in order to help protect themselves and stay alert to these tactics when shopping for their next vehicle. Consumer groups believe that prospective car buyers should be fully aware of all of the psychological tricks that car dealers use to convince them to make purchases, and having all of the information is the first step to making a fully informed decision on whether or not to make the commitment to buy that next car.
What is “Yo-Yo Financing”?
It is where a car dealers allow buyers to leave the dealership with their new vehicle even through the financing process may not be complete. Essentially, it means that a consumer has driven off with a car that hasn’t yet been paid for, and they are “yo-yoed” or called back into the office again.
Some of the excuses that a dealership gives for why the financing process hasn’t been finished include:
- There has been a technical problem with the computer system
- The financing department has had some problems
- The financing has run into problems and the consumer needs to return the car to the dealership.
The usual next step is for consumers to return to the dealership and then be pressured into signing a new financing deal that is often much more expensive than the one they were initially quoted.
What are consumer groups doing about this practice?
The Federal Trade Commission (FTC) and the Bureau of Consumer Protection are very concerned about consumers being manipulated in this way and has embarked on a high profile awareness campaign to help protect consumers. To this end, the FTC has done a television interview which was broadcast on ABC News’ “The Lookout” program.
Who is at the most risk of yo-yo financing?
Consumers with credit issues and difficulties with finding finance for vehicles are the most at risk of yo-yo financing, and therefore the most vulnerable. If a consumer has a checked history with loan repayments or a less than stellar credit score, they may believe (falsely) that they will be unable to do better than the offer the dealership is giving to them.
Typically, these consumers sign the contract, think that the deal has been completed and then feel concerned that they cannot find another deal of the same kind when they receive a “yo-yo” call from the dealership telling them that the deal has not actually been finalized or worse, that it has been cancelled.
Hidden Camera Exposed the Truth
In a bid to catch car dealers in the act, ABC News went with a consumer who was given the “yo-yo financing” treatment and equipped her with a hidden camera. Once in the dealership, the camera caught the salesman telling her that the deal had to be re-done because the original financing deal was no longer available. Instead, the consumer would need to pay an extra $300 in order to keep the car that she had already been driving around for one week.
ABC News confronted that salesman about the changes to the deal. The salesman claimed that the consumer had signed a document promising to bring the car back to the dealership if the financing deal was not completed. However, despite being asked repeatedly for proof of this document, the salesman refused to adduce a copy of the document for ABC News to see as evidence.
Eventually, the owner of the dealership produced the document which was not signed by the consumer. It has been signed by the salesman. The dealership promised to abide by the original deal after being exposed as lying to ABC News and the consumer.
Most dealerships are honest
The National Automobile Dealers’ Association says that the overwhelming majority of car deals occur without any fraud or coercion, but that consumers should still be aware of what some of the less reputable dealerships do.
Have you experienced some sneaky sales tactics at the car dealership? Did you see the report on ABC News? Share your thoughts and comments below – we would love to hear what you think!