Have you purchased a new car and reached an agreement with the dealer to drive it off the lot immediately, without the final approval of financial arrangement? Sorry to disappoint you but the chances are high that you will be the victim of a dealer fraud called “Yo-Yo” sales tactic.
It is a common practice for car dealers to sell or lease a car without the final financial approval and ensure the consumers that approval is “guaranteed”. Here is how it works: the dealership convinced the customer that the financing was approved. The customer signs the contract and takes the car home. And then he/she gets a scary phone call from the dealership.
Dealers know from the experience that people get attached to their new cars easily. And this is how they manipulate the customers. The customers usually show their new car off to their friends, enjoy driving it and get attached to it when they get a call from the dealership claiming that their transaction was canceled. The dealership then suggests the consumer signing a new contract with more expensive credit terms. Naturally, the customer will choose to sign the contract rather than explain his/her family and friends that he/she had to return the car because of his/her poor credit. This is the way the “Yo-Yo” sales tactic is practiced.
Legal issues resulting from “Yo-Yo” sales tactic
Here are some legal issues that arise from “Yo-Yo” sales tactic:
- Illegally backdating the second purchase contract, adjusting it to the date of the first contract – This is a serious legal violation both under federal and state laws. It is a sufficient basis for the customer to cancel the deal, return the car and get refunded. In case you discover that your car purchase or lease contract was backdated, do not hesitate to contact an attorney and become aware of your legal rights.
- Refusing to refund the whole down payment – This is another illegal step practiced by the dealership. Under California law, when a car dealer rescinds a car transaction in the result of the inability of getting financing, the dealer is obliged to refund the customer the whole amount he/she paid, including sales tax or other payments included in the purchase contract. By law, the dealer is not even allowed to impose any charge for the mileage the customer put on the car.
- Imposing the customer to sign a second contract instead of returning the car – Dealers often use threatening methods to get the customers to sign a new contract with higher credit terms instead of returning the car. They can claim to ruin your credit history or call the cops for you took the car without paying for it. Neither of it is legal. Consumers have the right to cancel a car purchase if the seller changes the terms of the contract.
To avoid becoming a victim of “Yo-Yo” scam, it is recommended not to take a car off the lot until all the financing issues are solved and the paperwork is signed by both parties. However, if you somehow became the victim of “Yo-Yo” sale, be aware that it is illegal under California Consumer Protection statutes. To proceed a claim against a dealership for “Yo-Yo” sale for, a consumer needs to be able to prove that:
- “Yo-Yo” sale caused monetary damage to the customer in some way.
- The dealer could have known that the financing would be denied but intentionally hid it.
If you are a victim of a “Yo-Yo” scam, the experienced and knowledgeable auto fraud attorneys at the Margarian Law firm can help you make a solid claim and get compensated for your down payment and other damages.