Yo-Yo Car Scam Delivers Threats and Bills

A car scam that I've heard about [on the inside] years ago is back, but in a new guise that's catching out hundreds of buyers.
The original scam goes like this, a "spot delivery service in which buyers get their new vehicle"on the spot" but are later told they have to make bigger payments because their original credit application wasn't approved. Now, shady dealers have gone several steps further by repossessing cars and refusing to return deposits or trade-ins. This trick has become known as the "yo-yo" car scam and recently attracted the attention of the Center for Responsible Lending (CRL).   

What many car buyers don't realize is that when they sign an auto finance deal, the contract the dealer draws up is often sold to a third party financial organization at a price the dealer has to negotiate. When the dealer can't get the price they want, they demand you return the car. They may do this several times over. Sometimes, dealers knowingly offer interest rate deals they will never be able to sell to a finance house but they offer them anyway to stop you from going elsewhere to buy. They take in a down payment and trade-in before yanking the yo-yo string. Crooked dealers will imply the financing is firmly arranged when you buy and assure you it won't be changed, while insisting you sign a form that makes clear in the small print that the purchase is conditional on the dealer securing the financing later. 
 
A CRL survey of 2,100 complainant buyers found that more than a quarter of them were hit by yo-yo car scams, and almost half of these victims subsequently had trouble getting their down payment or trade-in back. In some cases, the dealer threatened legal action unless the car was promptly returned, or presented victims with a bill for mileage driven in the car or supposed wear and tear. 

 

"In some cases, the dealer may threaten to call law enforcement on charges of auto theft if the consumer does not return the vehicle immediately," CRL explains in a newly published report. Under the mounting pressure of the situation, many consumers agree to the new loan terms. A dealer's refusal to return the trade-in vehicle or down payment pressures the consumer to agree to a more expensive loan. The threat of legal action or involvement of law enforcement adds even more leverage for the dealer."

Alongside the Federal Trade Commission (FTC), CRL is calling for a change in the law to stop conditional spot delivery contracts. 
 
So what can you do?
Regardless of your beliefs about the honesty of car dealers, the fact is that the cards are always stacked in their favor. So, I recommend (as I advised last time) that you don't take the vehicle from the dealer until you're sure the financing deal is complete. Better yet, arrange your own financing -- if you can -- through your bank or other legitimate lending institution. Shop around for the best deal.
Check out the full CRL report -- Deal Or No Deal: How Yo-Yo Scams Rig the Game -- which you can download from the organization's website.

More Auto Scams

As if yo-yo deals weren't bad enough, a number of other auto scam tricks have surfaced recently, targeting people who already own their vehicles. 
 
Here are a couple to be on the lookout for:

• The windshield offer. You may not be planning to sell but you find a note on your windshield, tucked under the wiper, from someone saying they want to buy your car, offering such a great price that you decide to sell.  The buyer pays by check, you sign over the title, then the check bounces.  The "buyer" has disappeared by now and the vehicle is often sold on to another unwitting victim. 
   
  Action: You'd be crazy to fall for this, but some people have! Don't part with your car, or that DMV pink slip, until the payment has cleared the bank.  And, of course, if someone offers you an outrageously high price for your car, you can be pretty sure it's a scam. 
   
  
• The car-wrapping scam. Pressed for cash, you fall for an offer to "wrap" your auto in advertising for a big name company, in return for a large sum of money.  The offer comes via spam email or even in flyers distributed in your neighborhood. The use of well known brand names makes it seem legitimate and you're delighted when the check arrives. 
   
  But this is nothing more than an advance payment scam. As requested, you deposit the check and wire part of the sum to the person who will supposedly be doing the paintwork. But, of course, the money is going to the scammer and your untraceable cash is in his pocket before you find out the check bounced. 
   
  Action: Just don't do this. The chances of such a proposal being legitimate are tiny -- and if you're asked to wire cash then you know for sure it's a scam.
  

And The Old Favorite

Just time enough to remind you of one of the simplest and most common auto scams -- people selling cars that victims pay for and never receive. According to the FBI, 14,000 buyers, yes 14,0000, have fallen for this one in the past three years -- being sucker-punched by prices that are simply too good to be true, and then wiring money untraceably for vehicles they've never seen. Buying a car is one of the biggest one-off purchases you make in life and there are lots of crooks out there just waiting to trick you. 
 
What more reason do you need to keep all your wits about you? Double-check everything you do when you buy or sell a car, never wire money to people you don't know, never sign anything without reading the small print, and don't take delivery of or part with a car until the financial arrangements are complete and watertight. 
 
Follow these rules and you'll be well placed to steer clear of a car scam.