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damircudic/Getty Images August 18, 2022 Checkmark Bankrate logo How is this page expert verified? At Bankrate, we take the accuracy of our content seriously. "Expert verified" means that our Financial Review Board thoroughly evaluated the article for accuracy and clarity. The Review Board comprises a panel of financial experts whose objective is to ensure that our content is always objective and balanced. Their reviews hold us accountable for publishing high-quality and trustworthy content. This article was generated using automation technology and thoroughly edited and fact-checked by an editor on our editorial staff. Rhys has been editing and writing for Bankrate since late 2021. They are passionate about helping readers gain the confidence to take control of their finances by providing clear, well-researched information that breaks down otherwise complex topics into manageable bites. Mark Kantrowitz is an expert on student financial aid, the FAFSA, scholarships, 529 plans, education tax benefits and student loans. Bankrate logo

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Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next. Bankrate follows a strict , so you can trust that we’re putting your interests first. All of our content is authored by and edited by , who ensure everything we publish is objective, accurate and trustworthy. Our loans reporters and editors focus on the points consumers care about most — the different types of lending options, the best rates, the best lenders, how to pay off debt and more — so you can feel confident when investing your money. Bankrate logo

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You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. Auto loan , 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 raise the rate once the driver has signed the contract. This can leave consumers confused and frustrated, and often leads to them paying more for their car than they originally agreed to. But there are a few steps you can take to avoid being tricked by a yo-yo scammer and educating yourself is key.

What is a yo-yo scam

A yo-yo scam occurs when you go in to discuss a car loan. The might offer you an auto loan with a very low interest rate at the beginning of the conversation — usually a rate that is much lower than normal. The rate might sound too good to be true, and it usually is. You will be asked to sign documents with the lower rate listed, but a few days, or even weeks later, you’ll get a call or an email saying that the dealer can’t offer you that interest rate. They’ll also say that you need to renegotiate — or else the offer will be rescinded completely. The newly negotiated interest rate is typically much more expensive than the original loan, making for a confusing and frustrating experience. When you ask about the rate hike, it is likely that the dealer will say that you didn’t qualify for the initial interest rate, despite originally leading you to believe you did. This back and forth is where the scam gets its name. You’re let go with the car, then pulled back in like a yo-yo.

How to avoid yo-yo financing scams

Following these four steps will help you avoid yo-yo scams. Read the fine print. Even if you think you have a good grasp of what potential costs will be in a financing contract, read the fine print. Look for terms like “conditional” and what they mean if you don’t fully understand the context. If a rate or price is provided that’s higher than the original quoted, ask why. Avoid excessive or unnecessary charges. It’s possible for a to tack on additional charges to your final loan amount, resulting in higher payments. If you’re unsure of this, ask for a copy of the final paperwork, including the add-ons, before signing anything. Don’t agree to an auto loan until you’re ready. A lot of people are tempted to get their car as soon as possible. But financing the car at the dealership may lead to increased pressure from the salesperson. It’s better to have the financing to pay for the vehicle in full lined up before you even step foot in the . Don’t be afraid to walk away. This is always an option. And if you do decide to walk away from the dealership, be sure to note down what caused you to leave so that you can keep those flags in mind for the next dealership you head to. Ultimately, if you want to avoid yo-yo financing scams, you can always skip financing at a dealership completely. With online lenders, you can and find the best loan option without ever leaving your home.

What to do if you fall victim to a yo-yo scam

There are a few immediate actions you can take when a dealer tells you your financing has been denied.

Review the purchase contract

Check if the contract is a conditional sales agreement. If it is, you may be able to return the car and receive any money you put down along with your trade-in, if you made one.
If the dealer already sold your trade-in, you should receive the cash amount of the sale. And if the dealer refuses to refund the amount, you should contact your state attorney general’s office immediately.

Request the denial letter

Ask for the letter from the lender denying your auto loan request. If the dealer won’t provide it, you should likely back out immediately.

See if you can secure your own financing

If you, understandably, want to keep the car, see if the lender will give you the . From there, you can see about securing your own financing with an online lender, bank or credit union.

How to report the scam

You can report yo-yo auto loan scams to the Federal Trade Commission (FTC) online or by phone. When reporting, you will need to provide personal information to help authorities identify you. You can also contact your state attorney general’s office for more assistance.

Online

To begin, visit the FTC’s online complaint form at . Select “Get started now” to get to the form. From there select “Auto sale, repair” and the type of problem that best fits. You will then be directed to another page where you can provide more information about the scam, including company and the names of people you’ve spoken with. Once you submit the complaint, it will be reviewed and assigned to an investigator, who will investigate the scam and potentially contact you to ask for more information.

Telephone

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

The bottom line

Auto loan scammers are an unfortunate risk that comes with vehicle shopping, so it’s important that you before you sign on the dotted line. Be sure to educate yourself on the features of these loans and ask lenders to explain any questions you have along the way. Finally, if you believe you have been the victim of a yo-yo scam, report it.

Learn more

SHARE: This article was generated using automation technology and thoroughly edited and fact-checked by an editor on our editorial staff. Rhys has been editing and writing for Bankrate since late 2021. They are passionate about helping readers gain the confidence to take control of their finances by providing clear, well-researched information that breaks down otherwise complex topics into manageable bites. Mark Kantrowitz is an expert on student financial aid, the FAFSA, scholarships, 529 plans, education tax benefits and student loans.

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