topic Re: Yo-yo scam exploits credit-challenged car buyers in Auto Loans

Yo-yo scam exploits credit-challenged car buyers

pipeguy — Thu, 12 Apr 2012 19:56:02 GMT

Imagine this: You buy a car, sign all the paperwork and drive home. A few days or weeks later, you’re contacted by the dealer and told the financing has fallen through and you need to bring back the car or pay more money.

Mod Cut of Ludlow, Ky., doesn’t have to imagine what it’s like to be the victim of a “yo-yo” finance scam. Three weeks after she bought her car, the salesman called and said she couldn’t afford it and needed to bring it back.

If the dealer can’t sell the contract for the price they expected, Ingalsbe explains, they tell the buyer the financing fell through and demand a bigger down payment, a higher interest rate or both. In some cases, they want to cancel the deal and demand the vehicle back.

The yo-yo scam is really bait-and-switch on the financing. According to new research from the Center for Responsible Lending (CRL):

http://bottomline.msnbc.msn.com/_news/2012/04/12/11146297-yo-yo-scam-exploits-credit-challenged-car-buyers

Re: Yo-yo scam exploits credit-challenged car buyers

GrowingCredit — Fri, 13 Apr 2012 18:42:55 GMT

pipeguy wrote:
Imagine this: You buy a car, sign all the paperwork and drive home. A few days or weeks later, you’re contacted by the dealer and told the financing has fallen through and you need to bring back the car or pay more money.

Mod Cut of Ludlow, Ky., doesn’t have to imagine what it’s like to be the victim of a “yo-yo” finance scam. Three weeks after she bought her car, the salesman called and said she couldn’t afford it and needed to bring it back.
..

If the dealer can’t sell the contract for the price they expected, Ingalsbe explains, they tell the buyer the financing fell through and demand a bigger down payment, a higher interest rate or both. In some cases, they want to cancel the deal and demand the vehicle back.

The yo-yo scam is really bait-and-switch on the financing. According to new research from the Center for Responsible Lending (CRL):

http://bottomline.msnbc.msn.com/_news/2012/04/12/11146297-yo-yo-scam-exploits-credit-challenged-car-buyers

How to figure out such schemes, sinc eI would be in market in few months for new car. The reason for this is I have witnessed this and I was with my friend in the whole car buying process.

My friend had same problem where they dealership gave great price for his 96 corolla and he signed all the paper work and drove away the new car. Everything was OK for 2 weeks and than same thing happened. He got it cosigned with his cousin but still the APR as 2% higher than initial offer.

Re: Yo-yo scam exploits credit-challenged car buyers

pipeguy — Fri, 13 Apr 2012 19:50:49 GMT

Best bet IMO is what I always do.... Have a pre-approved Auto loan from a bank or Credit Union in hand before you go "serious" shopping. I have no problem letting the dealer try to beat my in hand loan, if they do I'll go with the dealer's source, but if they can't or they try to play games - the loan is already "bought" so you are covered.

In my experience, having purchased a lot of cars over the last 40 years, about 50% of the time the dealer can beat the in hand loan, and I'll also say I've never had a loan deal "go bad" after the papers are signed.

Re: Yo-yo scam exploits credit-challenged car buyers

webhopper — Fri, 13 Apr 2012 20:31:31 GMT

pipeguy wrote:
Best bet IMO is what I always do.... Have a pre-approved Auto loan from a bank or Credit Union in hand before you go "serious" shopping. I have no problem letting the dealer try to beat my in hand loan, if they do I'll go with the dealer's source, but if they can't or they try to play games - the loan is already "bought" so you are covered.

In my experience, having purchased a lot of cars over the last 40 years, about 50% of the time the dealer can beat the in hand loan, and I'll also say I've never had a loan deal "go bad" after the papers are signed.

I've had this happen and its an aweful way to do business... had the loan "go bad" 2 months after we drove the car off the lot. Went in to get the towing package installed on the vehicle... left in a little small car :( If I had known what i know now I would have called the police and demanded our trade in back.

Re: Yo-yo scam exploits credit-challenged car buyers

Walt_K — Sat, 14 Apr 2012 02:33:41 GMT

pipeguy wrote:
Best bet IMO is what I always do.... Have a pre-approved Auto loan from a bank or Credit Union in hand before you go "serious" shopping. I have no problem letting the dealer try to beat my in hand loan, if they do I'll go with the dealer's source, but if they can't or they try to play games - the loan is already "bought" so you are covered.

In my experience, having purchased a lot of cars over the last 40 years, about 50% of the time the dealer can beat the in hand loan, and I'll also say I've never had a loan deal "go bad" after the papers are signed.

Yes, but isn't the problem that this is targeted at people who do not have this option?

Re: Yo-yo scam exploits credit-challenged car buyers

pipeguy — Sat, 14 Apr 2012 04:06:08 GMT

Walt_K wrote:
pipeguy wrote:
Best bet IMO is what I always do.... Have a pre-approved Auto loan from a bank or Credit Union in hand before you go "serious" shopping. I have no problem letting the dealer try to beat my in hand loan, if they do I'll go with the dealer's source, but if they can't or they try to play games - the loan is already "bought" so you are covered.

In my experience, having purchased a lot of cars over the last 40 years, about 50% of the time the dealer can beat the in hand loan, and I'll also say I've never had a loan deal "go bad" after the papers are signed.

Yes, but isn't the problem that this is targeted at people who do not have this option?

Yes based on the article, but this is a quote from the article that could apply to anyone who finances through a dealer:

Dealers say most auto sales today are conditioned upon financing – you get the car on the spot, even though the loan approval isn’t final. In other words, when you finance through the dealer, in most cases the dealership reserves the right to unwind the deal if it doesn’t make enough money selling your loan on the open market.

3 weeks, 4 weeks, 6 weeks later even those with good credit could get caught in this trap - they have options but can you imagine going to your bank 6 weeks after you bought a car and say I need a loan now, like yesterday, give me your best deal. I think many if not most buyers would just re-sign the documents at a higher rate because of the pressure to get the deal-loan done.

Re: Yo-yo scam exploits credit-challenged car buyers

Walt_K — Sat, 14 Apr 2012 04:29:17 GMT

pipeguy wrote:
Walt_K wrote:
pipeguy wrote:
Best bet IMO is what I always do.... Have a pre-approved Auto loan from a bank or Credit Union in hand before you go "serious" shopping. I have no problem letting the dealer try to beat my in hand loan, if they do I'll go with the dealer's source, but if they can't or they try to play games - the loan is already "bought" so you are covered.

In my experience, having purchased a lot of cars over the last 40 years, about 50% of the time the dealer can beat the in hand loan, and I'll also say I've never had a loan deal "go bad" after the papers are signed.

Yes, but isn't the problem that this is targeted at people who do not have this option?
Yes based on the article, but this is a quote from the article that could apply to anyone who finances through a dealer:

Dealers say most auto sales today are conditioned upon financing – you get the car on the spot, even though the loan approval isn’t final. In other words, when you finance through the dealer, in most cases the dealership reserves the right to unwind the deal if it doesn’t make enough money selling your loan on the open market.

3 weeks, 4 weeks, 6 weeks later even those with good credit could get caught in this trap - they have options but can you imagine going to your bank 6 weeks after you bought a car and say I need a loan now, like yesterday, give me your best deal. I think many if not most buyers would just re-sign the documents at a higher rate because of the pressure to get the deal-loan done.

Point taken.

Re: Yo-yo scam exploits credit-challenged car buyers

JenniferinFL — Sat, 14 Apr 2012 06:55:42 GMT

Yeah, my husband got pretty much taken on the car he just bought. I don't have the heart to tell him that though..

Dealer pulled his credit report and told him that he'd get him 12%, sent him home with the car with $1000 down. Three days later calls to say there's a problem with the loan, can he put another $1000 down. Okay, so, goes puts another $1000 down. Calls again in a few days to say that it still isn't working out, can he put down another $1000, so he puts down another $1000.

Gets the loan paperwork two weeks later and he's paying 24% interest. Car was only $4500, but, despite putting $3000 down he still owes $3900 at 24% interest. I tell him to bring the car back then since the loan still hasn't been signed, but, my husband was embarrased to bring it back since all his coworkers and friends already saw it. He was just angry about the interest rate, he hasn't yet put two and two together to understand that he should only owe about $1800.

Yup, I'm married to someone who can't do basic math and lets pride get in the way of common sense, but, stupidity should be painful, so I'll let it slide this time.

I would venture that it's a lot more common at little hole in the wall type dealerships that can just close up and rename themselves when they attract too much negative attention.

Oh well, at least now he's had a car loan which was a credit type he was missing before, so, I guess that's worth something, but not as much as he paid for it.. lol

Re: Yo-yo scam exploits credit-challenged car buyers

Creditaddict — Sat, 14 Apr 2012 19:31:02 GMT

JenniferinFL wrote:
Yeah, my husband got pretty much taken on the car he just bought. I don't have the heart to tell him that though..

Dealer pulled his credit report and told him that he'd get him 12%, sent him home with the car with $1000 down. Three days later calls to say there's a problem with the loan, can he put another $1000 down. Okay, so, goes puts another $1000 down. Calls again in a few days to say that it still isn't working out, can he put down another $1000, so he puts down another $1000.

Gets the loan paperwork two weeks later and he's paying 24% interest. Car was only $4500, but, despite putting $3000 down he still owes $3900 at 24% interest. I tell him to bring the car back then since the loan still hasn't been signed, but, my husband was embarrased to bring it back since all his coworkers and friends already saw it. He was just angry about the interest rate, he hasn't yet put two and two together to understand that he should only owe about $1800.

Yup, I'm married to someone who can't do basic math and lets pride get in the way of common sense, but, stupidity should be painful, so I'll let it slide this time.

I would venture that it's a lot more common at little hole in the wall type dealerships that can just close up and rename themselves when they attract too much negative attention.

Oh well, at least now he's had a car loan which was a credit type he was missing before, so, I guess that's worth something, but not as much as he paid for it.. lol

UMMM... I don't even know what to say... he should be embarrased that he would allow someone to take that much money from him not that his co-workers saw a "new used" car already!!!! PLEASE PLEASE HELP HIM, if he paid $3k down and the car is $4500 why wouldn't he just pay cash!!!

and in what world would they be able to pull off legal loan documents showing purchase price $4500 + tax/lic, etc. $3k down, loan of $3900 still?! who cares about interst, take it back and pay cash and drive away no loan!!!!

Back to the original poster, I'm sure it happens much more for bad credit but my friend traded in his 08-09' (I forget exact year) Toyota Corrola for a 2010 Toyota Prius I believe. The dealer offered him like 1.9 or 2.9 (something very low based on his 810 credit score) but he was also very upside down on the corolla, taxes in CA very high and he put nothing down!!

In the end his loan payment was still cheaper and lower interest then the Corolla so it made since to him... Well despite an 810 anything toyota did not like financing $23-$24k on a car that the dealer valued at $16k to make the numbers work or trade in, not sure which numbers were so far off... either way like month 2 or 3 they said he needed to bring the car back or arrange his own financing (This is where you should get smart with yourself and research all the laws right quick!!!)

After 30 days in CA, 1. they can't make you bring it back, 2. if they don't have your car you traded in something else happens, overall he said I'm not bringing it back, I'm not giving you money and I'm not paying any different then my loan papers show....

Basically left the dealer paying what Toyota wouldn't or something.

I had some issues back in 2006 when I took my 1 month old 2005 G35 back to dealership and traded for a 2006 QX56... I had 8.9% with Infiniti for the G35 and the Manager (not finance) told me he could put me in the QX56 for $40 more than the FX35 I was looking at. (ummm difference of only about $20k in price!!!) He also tier 1 my credit (650 at time from purchase of G35, didn't pull new credit) and I drove off the show room floor (I was very stupid) but 4.9% at 72 mmonths was promo then.

I did not have financing for over 3 months, Finance manager called me 2 for income and bank documents and third time I told him I can be at the dealership in 30 minutes to pick up my G35 or he could send me the payment book from the bank and I'll keep the QX56... I never heard from him again!

To sum up... DO NOT take the car if you do not have final financing and signed papers!!!

I don't care what they say (if you have to go to lunch, meeting, whatever and you are coming back in 1 hours, I don't care if it's 5 minutes, DRIVE YOUR CAR NOT CAR YOU ARE BUYING!!!!

It's a tough lesson if you learned it yourself, I know it won't happen to me again and I didn't even really get scammed, I got what I wanted even if not smart... but stay cool and clear so you can process things and don't be afraid to say I will be back tomorrow (keep your car!)

and if a sales person or finance person starts to insult me in a sales tacted to make me feel I have no options this should make the hair on your neck go up and say "GET OUT!!!" cars are available by the millions, dealerships are too... find another :)

Re: Yo-yo scam exploits credit-challenged car buyers

marty56 — Sat, 14 Apr 2012 21:33:36 GMT

Creditaddict wrote:
To sum up... DO NOT take the car if you do not have final financing and signed papers!!!
I don't care what they say (if you have to go to lunch, meeting, whatever and you are coming back in 1 hours, I don't care if it's 5 minutes, DRIVE YOUR CAR NOT CAR YOU ARE BUYING!!!!

Re: Yo-yo scam exploits credit-challenged car buyers

JenniferinFL — Sat, 14 Apr 2012 23:01:50 GMT

I completely agree. My husband is gullible, very gullible. He's from Canada, what can I say.. lol

I don't know why I let him go by himself to get the car. I should've been more involved, but, he was so proud of himself as this is the first financial thing he's done all by himself. I knew as an 18 year old that if you aren't careful you get screwed over. The first vehicle I tried to trade in as a 20 year old was a 2 year old GTP Grand Prix in mint condition, it was perfect, low miles and so on. I checked blue blook trade in value before I went. Dealership told me my car wasn't only worth $4000, but they'd finance the remaining $10,000 into my next loan and I could have this new Chevy S-10 for just $720 a month, a steal of a deal.. lol.. At one point they had three car salesman in the room with me demanding that I hurry up and sign. I demanded the keys to my car back and left, finally had to threaten to call the police to get my car keys back. My goofball husband would've just trusted the salesman that it was a good deal and signed..

The next car we buy will be a purchase I make when we switch to him being a stay at home Dad and me being the working parent. The contract he signed allowed no recouse, not even a 24 hour window to change your mind. I really didn't see an opportunity to fix it as he had already signed and what he signed had all the fees listed, so, it's his own stupid fault. It wasn't that secretive, it was all written out, so I don't really see a loophole.

Re: Yo-yo scam exploits credit-challenged car buyers

Creditaddict — Sat, 14 Apr 2012 23:18:39 GMT

The contract he signed allowed no recouse, not even a 24 hour window to change your mind. I really didn't see an opportunity to fix it as he had already signed and what he signed had all the fees listed, so, it's his own stupid fault. It wasn't that secretive, it was all written out, so I don't really see a loophole.

I'm not sure what state you are in and I am far from an attorney but that doesn't pass the "smell" test as my father would say. If it doesn't sit right, feel right, look right, it probably aint right. I would e-mail your local news (many have investigative reports segments) or an attorney, maybe you can find one that is nice enough to just say rather this is legal or not or even if it is legal can we do anything about it.... They say no well EXPENSIVE lesson Learned... if they say yes this is wrong wrong wrong, then you have to figure out rather his fees are worth it, if the dealership would just say oops on this and fix it to not fight in court etc. but I would atleast look into it... I still can't even read those numbers and not get FIRE MAD and I guess that's because I have lost a LOT more then that so I hate to see others loose!

Re: Yo-yo scam exploits credit-challenged car buyers

TapDancer324 — Sun, 15 Apr 2012 20:05:41 GMT

Creditaddict wrote:
The contract he signed allowed no recouse, not even a 24 hour window to change your mind. I really didn't see an opportunity to fix it as he had already signed and what he signed had all the fees listed, so, it's his own stupid fault. It wasn't that secretive, it was all written out, so I don't really see a loophole.

I'm not sure what state you are in and I am far from an attorney but that doesn't pass the "smell" test as my father would say. If it doesn't sit right, feel right, look right, it probably aint right. I would e-mail your local news (many have investigative reports segments) or an attorney, maybe you can find one that is nice enough to just say rather this is legal or not or even if it is legal can we do anything about it.... They say no well EXPENSIVE lesson Learned... if they say yes this is wrong wrong wrong, then you have to figure out rather his fees are worth it, if the dealership would just say oops on this and fix it to not fight in court etc. but I would atleast look into it... I still can't even read those numbers and not get FIRE MAD and I guess that's because I have lost a LOT more then that so I hate to see others loose!

+1 and report this to the BBB

Re: Yo-yo scam exploits credit-challenged car buyers

GrowingCredit — Mon, 16 Apr 2012 17:48:39 GMT

TapDancer324 wrote:
Creditaddict wrote:
The contract he signed allowed no recouse, not even a 24 hour window to change your mind. I really didn't see an opportunity to fix it as he had already signed and what he signed had all the fees listed, so, it's his own stupid fault. It wasn't that secretive, it was all written out, so I don't really see a loophole.

I'm not sure what state you are in and I am far from an attorney but that doesn't pass the "smell" test as my father would say. If it doesn't sit right, feel right, look right, it probably aint right. I would e-mail your local news (many have investigative reports segments) or an attorney, maybe you can find one that is nice enough to just say rather this is legal or not or even if it is legal can we do anything about it.... They say no well EXPENSIVE lesson Learned... if they say yes this is wrong wrong wrong, then you have to figure out rather his fees are worth it, if the dealership would just say oops on this and fix it to not fight in court etc. but I would atleast look into it... I still can't even read those numbers and not get FIRE MAD and I guess that's because I have lost a LOT more then that so I hate to see others loose!
+1 and report this to the BBB

+1.

BBB is the way to go