How to avoid a Yo-Yo car loan scam?

How to avoid a Yo-Yo car loan scam?

Car 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 call, then increasing it once the driver has signed the contract.

This can leave consumers confused and frustrated, often leading them to pay 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 to discuss a car loan. The dealer can offer you a car loan at a very low interest rate at the beginning of the conversation – usually a rate much lower than usual. The rate may sound too good to be true, and it usually is.

You will be asked to sign documents with the quoted lower rate, but a few days or even weeks later you will receive a call or email stating that the dealer cannot offer you that rate. They will also tell you to renegotiate – otherwise the offer will be withdrawn completely.

The newly negotiated 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, it’s likely the dealer will say you didn’t qualify for the initial rate, despite initially thinking you did.

How to avoid yo-yo financing scams?

By following these four steps, you can avoid yo-yo scams.

  1. Read the fine print. Even if you think you understand the potential costs 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 given that is higher than the original, ask why.
  2. Avoid excessive or unnecessary costs. It is possible for a dealer to charge extra on your final loan amount, resulting in higher payments. If you’re not sure about this, ask for a copy of the final paperwork, including the add-ons, before signing anything.
  3. Only agree to a car loan when you are ready. Many people are tempted to get their car as soon as possible. But financing the car at the dealership can lead to increased pressure from the seller. Better to have the financing to pay for the vehicle in full before you even set foot at the dealership.
  4. Don’t be afraid to run away. This is always an option. And if you decide to walk away from the dealer, write down why you left so you can keep those flags in mind for the next dealer you go to.

Ultimately, if you want to avoid yo-yo financing scams, you can always skip financing from a dealer entirely. Online lenders allow you to get prequalified 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 that your financing has been declined.

View the purchase contract

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

Request the letter of denial

Ask for the letter from the lender rejecting your car loan application. If the dealer doesn’t give it, you should probably pull out immediately.

See if you can secure your own financing

Understandably, if you want to keep the car, see if the lender gives you the outside price. From there, you can see how to secure your own financing with an online lender, bank, or credit union.

How to report the scam

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


To get started, visit the FTC’s online complaint form at After providing some information about the yo-yo scams you’ve been through, you can select the “Cars” section as the category under which you’re reporting the scams. From there, select “Other” as the subject and “Automatically Borrow, Lease, or Refinance” as the specific type of scam. You will then be redirected to another page where you can provide more information about the scam, including the scammer’s email address, phone number and the names of the people you spoke to.

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


You can also reach the FTC by phone, Monday through Friday, 8:00 a.m. to 5:00 p.m. ET, at 877-382-4357.


Finally, you can also complete and submit the FTC’s online complaint form. Once you have completed the form, it will be reviewed and sent to an agent for further investigation, but it may take a while for the investigator to contact you.

it comes down to

Car loan scammers pose an unfortunate risk associated with buying vehicles, so it’s important that you do your homework before signing on the dotted line. Be sure to educate yourself about the features of these loans and ask lenders to explain any questions you may have along the way. Finally, if you think you have been the victim of a yo-yo scam, report it.

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