Drivers who are thinking about buying cars should proceed with caution when shopping at a dealership. Sometimes, car salesmen will offer drivers seemingly great financing deals and they will drive off the lot in their new cars, only to get a call from the dealer, saying that the financing plan has fallen through, according to The Baltimore Sun. This practice, often called yo-yo financing, is declining because consumers are able to research their financial options online before they even set foot in an auto showroom, but it still happens.
Ozell Carter, a Maryland resident, fell victim to yo-yo financing last year. He signed a contract for a 54-month payment plan, and a week after driving away in his 2004 Mercury Sable, Carter got a call from his dealer offering him a better deal that would lower his monthly payments from $278 to $235 over a 5-year period. He quickly accepted and sold his old car. After more than a month, Carter found out that the financing plan wasn’t approved, so he was forced to return the car and make other arrangements.
“It was devastating – I cried,” Carter told the news source. “I cried because it was a major setback.”
The Motor Vehicle Administration has put plenty of rules in place to prevent yo-yo financing, but dealers don’t always follow the rules, and unsuspecting buyers may become victims of fraud. The agency reports that many cases go unreported because dealers and consumers are often able to work out a compromise.
One way to avoid this same problem is to do plenty of research on loans and financing before speaking to a dealer. Credit scores are a major factor for auto loans, but there are still affordable options for drivers with less than perfect credit.
Carter’s lawyer, Jane Santoni, suggests that drivers are often better off sorting out their financing with a third-party lender before they go to a dealer. Drivers can use an auto loan calculator to determine the terms that would be acceptable for their budgets.
“It’s unfair to let customers leave thinking they bought a car, if you don’t think they bought the car,” Jack Fitzgerald, an auto dealer with stores in multiple states, told the news source. He also suggests that drivers should never leave the dealership unless they are certain that the contract is complete.