Going through the whole car buying process can be stressful enough without worrying about getting scammed by a smarmy car salesman. After deciding what kind of car you want and finding that car in the right color, you have to talk about financing. Unless you won the lottery, navigating the complexities of financing, interest rates, loan terms, and credit scores can pile on the stress. Finally, you get your car, sign the loan paperwork, and drive home thinking you can relax.

The next day, you get a phone call from a salesman and are introduced to one of the worst auto scams: yo-yo financing. And, no, we are not talking about a free yo-yo with purchase.  

Beware of the yo-yo salesman scam

The basics of yo-yo financing scams are when the dealer salesman calls you after you have taken your new car home and informs you that there is some problem with your financing, typically that the bank denied your financing. They will generally ask you to come back down to the dealership to sort it out and present you with new financing that either has a higher interest rate, a higher price, usually in the form of down payment, or both. And salesmen will also throw out words like “criminal charges” or “loss of down payment” to convince you to sign the new deal. 

Don’t compromise on your promised rate or price with your salesman

So, what should you do if the dealer calls you and tries to change the financial terms? First, you should know that you can’t be charged with auto theft if you refuse to sign the new deal unless you also refuse to return the car. If you receive this type of call, you should look through the paperwork given to you at the dealership for a “spot delivery” form. This document states that your loan is not approved, and if the bank denies your financing, you may have to return the car. If the dealer did not provide this form, they have no legal right to take the car back or renegotiate your financing. 

If your dealer did provide this form, that does not mean you have to take the car back or accept the new financial terms. According to one Reddit user, who states they are a “25 year industry vet,” you should be firm and tell the dealer in no uncertain terms that you do not want any other deal that is not identical to the one they provided. If they refuse, which they can, let the dealer know they can pick up the car, but not until you receive your down payment back in the form of a certified check. 

And do not go down to the dealership to discuss it

You have more leverage over the car salesman if you refuse to go back to the dealership. As the Reddit user says, “let him sweat.” Dealers want you to stay in the car. They don’t want to take it back and give you your money back. Many cars depreciate as soon as you drive them off the lot, which means the dealer will not be able to get as much if they take it back and try to resell it. 

One of the best ways to avoid falling prey to this scam is to obtain financing before going to the dealership. If you do get financing through the dealership, ask for the lender agreement and proof of loan approval. And if the dealer asks you to sign the “spot delivery” form or a “borrowed car agreement,” it likely means your financing was not approved, and you should wait until you have official approval, even if that means not driving home in your new car. Remember, unless you are buying an ultra-rare car, you can always go somewhere else to buy.