How to Avoid a Yo-Yo Car Loan Scam – | Car Plazas

Auto loan scammers, or “yo-yo” scammers, are a serious problem in the United States. These scammers work by offering a very low interest rate at the beginning of the conversation, only to increase the interest rate once the driver has signed the contract.

This can confuse and frustrate consumers and often results in them paying more for their car than they originally agreed. But there are a few steps you can take to avoid being scammed by a yo-yo scammer, and educating yourself is key.

What is a yo-yo scam?

A yo-yo scam occurs when you are discussing a car loan. At the start of the conversation, the dealership may offer you a car loan with a very low interest rate—usually a rate that is much lower than normal. The guess might sound too good to be true, and it usually is.

You will be asked to sign documents at the lower rate listed, but a few days or even weeks later you will receive a phone call or email telling you that the merchant cannot offer you that rate. They will also say you need to renegotiate – or the offer will be withdrawn entirely.

The renegotiated interest rate is usually much more expensive than the original loan, making for a confusing and frustrating experience. If you ask about the rate hike, the dealer will likely say that you didn’t qualify for the original rate, even though you initially led them to believe you did.

This back and forth gave the scam its name. They are released with the car and then pulled back in like a yo-yo.

How to avoid yo-yo funding scams

Following these four steps will help you avoid yo-yo scams.

  1. Read the fine print. Even if you think you have a good grasp of the potential cost of a finance deal, read the fine print. Look up terms like “conditional” and what they mean if you don’t fully understand the context. If a rate or price is quoted that is higher than what was originally quoted, ask why.
  2. Avoid excessive or unnecessary fees. It’s possible for a dealership to add additional fees to your final loan amount, resulting in higher payments. If you are unsure, ask for a copy of the final paperwork, including add-ons, before signing anything.
  3. Don’t agree to a car loan until you’re ready. Many people are tempted to get their car as soon as possible. But financing the car from the dealer can lead to increased pressure from the seller. It’s better to have the financing to pay for the vehicle in full before you even set foot in the dealership.
  4. Don’t be afraid to walk away. This is always an option. And if you do decide to leave the dealership, be sure to write down what prompted you to leave so you can keep those flags in mind for the next dealership you go to.

Ultimately, if you want to avoid yo-yo financing scams, you can always skip financing at a retailer entirely. Online lenders allow you to pre-qualify and find the best loan option without ever leaving your home.

What to do if you are a victim of a yo-yo scam

There are some immediate actions you can take if a merchant notifies you that your financing has been declined.

Check the purchase contract

Check whether the contract is a conditional purchase contract. If this is the case, you may be able to return the car and receive the money you deposited along with your trade-in, if you made one.
If the merchant has already sold your trade-in, you should receive the cash amount of the sale. And if the merchant refuses to refund the amount, you should contact your Attorney General’s Office immediately.

Request the rejection notice

Request the letter from the lender denying your car loan application. If the dealer doesn’t provide it, you should probably resign immediately.

See if you can secure your own funding

If you understandably want to keep the car, see if the lender will give you the outside price. From there, you can see how to secure your own financing from an online lender, bank, or credit union.

How to report the scam

You can report yo-yo auto loan fraud to the Federal Trade Commission (FTC) online or by phone. When reporting, you must provide personal information so that the authorities can identify you. You can also contact the Attorney General’s Office for further assistance.


First, visit the FTC’s online complaint form at Select “Start Now” to go to the form. From there, select “Car Sale, Repair” and the type of problem that best suits you. You will then be taken to another page where you can provide more information about the scam, including the company and the names of people you spoke to.

Once you submit the complaint, it will be reviewed and assigned to an investigator who will investigate the fraud and may contact you to request more information.


You can also contact the FTC by phone at 877-382-4357. The call goes to the FTC’s Consumer Response Center.

The final result

Auto loan scammers are an unfortunate risk that comes with buying a car, so it’s important to do your homework before you sign the dotted line. Be sure to learn about the features of these loans and ask the lenders to explain any questions you may have along the way. Finally, if you think you’ve been the victim of a yo-yo scam, report it.

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