If you ever listen to the radio, you have probably heard car dealership commercials for “0% financing” or “sign and drive” events. For poor consumers or those with bad credit, these deals can seem too good to be true. They often are. Learn what to watch for to avoid yo-yo financing schemes and make sure you don’t lose that new car.


What is Yo-Yo Financing?

Yo-yo financing, often called spot delivery financing is a manipulative tool used by auto dealers to get consumers to pay more than they bargained for on new and used vehicles. Here’s what it looks like:

You find a car at a dealership. You negotiate the terms of the sale with the dealer, including down payment, the length of the loan, monthly payments, and interest rates. You fill out all the paperwork (including the loan application), and pay the down payment. Then the dealer hands you the keys and you drive away in your new vehicle.

Then a few days (or maybe a week) later, the dealership calls and says that your loan was not approved. The representative tries to get you to pay an additional down payment or renegotiate at a higher interest rate, usually claiming there was a problem with either your paperwork or your credit.

This kind of renegotiation after the fact is called yo-yo financing because you are told the sale is final and then the dealership pulls the string to bring you back in. “Spot delivery” refers to the fact that consumers receive the vehicles on the spot, making it harder for them to void the agreement because it feels like a loss.


Are Yo-Yo Financing Schemes Legal in Michigan?

Yo-yo financing is simply a money grab. It’s an attempt to pressure the consumer into a worse deal. It is also illegal in Michigan. The Truth in Lending Act and the Michigan Credit Reform Act both provide protections to the victims of yo-yo financing schemes.

Ultimately, it comes down to what the papers you signed actually say. Either you signed a sales contract, which finalized the terms and completed the sale, or you didn’t. A contract that conditions the sale on adequate financing means that technically you do not yet own the car. Depending on which category applies, you may be able to enforce the contract (and its more favorable terms), or return the vehicle and get a refund of your down payment.

Dealerships using yo-yo financing schemes are counting on the fact that it can be hard to read and understand auto sales contracts. If you get a call asking to renegotiate the terms of your auto loan, you should contact a consumer protection attorney right away. That way you can understand your rights, and get someone to help you fight back against bully tactics and illegal auto loan fraud.


Warning Signs You Might Be the Victim of Yo-Yo Financing

It’s not always easy to know whether you are looking at a good deal, or a bad set up. When buying a new or used car, watch out for these warning signs:

  • The dealership uses advertising including “0% Down” “Sign and Drive” or “Drive Now, Pay Later” incentives.
  • Your financing is approved after normal business hours (evening and weekends) when the banks are closed.
  • The dealership won’t tell you the name of the financing company.
  • There are blanks left open on your contract.
  • The dealership calls you later saying the financing deal fell through.
  • The representative asks you to pay an additional down payment or agree to a higher interest rate.
  • The representative says there were mistakes, and may say he or she will be fired or docked commission unless you agree to fix them.
  • The representative tries to claim you made false statements about your credit or your loan eligibility.
  • The dealership threatens to report the vehicle as stolen, repossess the vehicle, or report you to the credit agencies.
  • The dealership claims it must charge you a restocking fee or rental fee when you try to return the vehicle.


The dealership employees who use yo-yo financing schemes are always coming up with new ways to manipulate consumers into paying more. If you’re not sure, get help.

Dani Liblang

Author Dani Liblang

Dani K. Liblang is a collections harassment defense attorney at The Liblang Law Firm, PC, in Birmingham, Michigan. If you are being harassed by debt collectors, contact The Liblang Law Firm today for a free consultation.

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