Yo-yo financing fraud is one of the most common practices of car dealerships. It is also known as the spot delivery fraud. This car scam happens to consumers with below average credit score, when the car dealer convinces the consumer to drive off in cars without finalizing their loans.
Typically, the finance manager at the dealership will tell you you’re told that your credit score is excellent and that you got a good APR on the loan. They will give the customer some paperwork to sign, give the keys to the vehicle and tell you that the sale is final pending loan approval. The consumer takes the car and leaves. However, a few days later the representative of the dealership calls you and informs that loan fell through because you did not qualify for the interest rate. The car buyer is asked to come back to the dealership and sign a new loan, most likely with a higher interest rate.
What car buyers don’t know is that the dealership knows the interest rate that you qualify for and is well aware that you don’t qualify for the deal you have signed. Car dealers know that even if you qualify your interest rate would be high.
If you have below average credit and want to buy a vehicle then you a potential target for yo-yo financing fraud, so be careful.