Even though you’ve traded in your old car, made a down payment on your new one and driven it off the lot, make sure you are 100% sure that any financing you have on your vehicle is complete. If it’s not, you might soon find yourself out your down payment and without your new wheels — or even the car you traded in.
Here’s how the St. Louis Post-Dispatch describes the practice known as “yo-yoing”:
A consumer drives away having just bought a car and signed a loan agreement, thinking financing is in place. Then the dealer is unable to sell the loan to a finance company, so the dealer wants to renegotiate the deal with the customer or take the car back.
But it doesn’t just end with the deal changing or the new vehicle being repossessed. That down payment and the car you traded in? There’s a chance you won’t get either of those back, as the dealer will say that money now covers the mileage you put on the car while it was in your possession.
Yo-yoing is used mainly at used car dealers and the people who fall for the deal are generally buyers with bad or no credit histories. These buyers are often not savvy about the ins and outs of applying for a loan, so many of them believe that their financing is resolved when they drive off the lot.
But yo-yoing dealers will include a document in the paperwork that states the sale is contingent on the dealer’s ability to sell the loan.
If no one buys the loan from the car dealer, the car purchaser is not only required to return the car, but is often hit with a fee. According to the Post-Dispatch, that can be upward of $30/day or $.50-$1 per mile driven since the sale.
So be aware that any financing offered by a dealer may not, in fact, be anything more than an agreement to finance the car if the loan can be re-sold to a financial institution.
‘Yo-yoing’ practice by car dealers irks customers [STLtoday.com]
Thanks to Trung and Jennifer for the tip!