FTC to auto dealers: don’t toy with yo-yo financing

Buying a car can be exciting, but what if there are strings attached? Some buyers told us that they financed a car through a dealership, signed a contract, and drove the car home, only to be told that the financing didn't go through and they had to sign a new deal or lose their down payment. There’s a name for that: it’s called a “yo-yo” financing tactic. It’s just one of a trunk-load of charges the FTC is bringing against Sage Auto Group, a group of nine Los Angeles-based auto dealerships, and the three brothers who control them.

The FTC alleges that Sage Auto engaged in a host of yo-yo financing tactics. For example, Sage Auto allegedly told customers the contract was cancelled, but the dealer would keep their down payments or trade-ins if the customers refused to sign a new deal. The dealerships even threatened some customers with arrest, criminal prosecution, or vehicle repossession if they didn’t take the second deal – even when the original deal was still valid.

As if yo-yo financing isn’t egregious enough, the FTC also alleges the defendants packed on extra charges for aftermarket products and services, like extended warranties, guaranteed auto protection, and service plans, without customer consent. Sometimes, Sage Auto falsely claimed the products were required as part of the sale or financing or were being thrown in for free. In reality, Sage Auto was adding those charges into the amount financed by consumers.

The FTC’s complaint also says Sage Auto used phony online reviews to tout their dealerships and to try to discredit negative reviews about the company’s bad advertising, sales, and financing practices. Potential customers rely on online reviews to decide where to shop, and Sage Auto undermined that ability with phony reviews written by its employees and other people tied to the dealerships. The FTC’s lawsuit seeks a court order to require Sage Auto to stop these bad practices and give refunds to some customers.

Today’s action is part of the FTC’s continuing efforts to protect buyers from deceptive advertising in the auto marketplace. If you think you’ve been misled when buying a car, report it to the FTC.

If you’re in the market for a car, don’t let deceptive sales, financing, or leasing practices leave you spinning your wheels. To find your best deal, shop around and compare offers from different dealers and financing sources like banks or credit unions. And check out our free publications about buying and owning a car before you start shopping.

Blog Topics: 
Money & Credit

Comments

How about swearing your the co signer just to find out from the CU that you are the "owner"- other person did not qualify, but nobody told me.

The FTC publication, Co-signing a Loan, explains your obligations if you decide to co-sign on a loan for a friend or relative.

I had a shock also, bought a Genesis fro Prime Dealer in Rockland at their Quincy outlet. The sales service was fine except, last minute they asked me if I would like a Genesis symbol on the car instead of Huyandi. Only $ 125 and then I find out the same is available on line for $10.

2nd I was asked to sign for something after the deal was done and ready to take the car away. It turned out a form that was annually deduction $180 for updating my GPB and connection to Blue link, as the installed system will only work for 6 months.

This is a very useful and informative article. It's a shame we have to become so educated about the ripoff tactics of these so-called "businesses" but an educated consumer certainly has the upper hand in these situations.

Thanks 2 All 4 Info! bf 5

I have a claim against Felix Chevrolet and Ally Bank. English is my second language and I need help in Spanish. Thanks

We don't publish personal information, or contact people directly. The Los Angeles Department of Consumer & Business Affairs has a information in Spanish online, and lists contact numbers so you can call for more help. The FTC also has information about buying & owning a car in Spanish.

I need to file a report....this company let my son write a bad check so that he could get the car off the lot....let the insurance xompany move them off the insurance policy AFTERWARDS and they are a financing company...so the insurance removed them and the comp and collision off of his car...

whay does people hv to be so sheisty to make a buck. I m glad to learn there is somewhere to complain and have action taken againat them. They also relorted my son to dmv 2 days later for writing this bounced check

You can report the car dealer to your state Attorney General’s office and to the FTC. File a complaint with the FTC at FTC.gov/complaint. The information you give will go into a database that law enforcement uses for investigations.

If you have questions or concerns about what the insurance company did, you can contact the insurance commission for your state. Search on line for your state name + the words "insurance commission."

Stay away from Hyundai Motor Finance Corporation. We are going through hell with them, after deciding to assume my father's lease, upon his death. They are by far the most inept, shady organization that I have ever done business with.

It is funny that the last person warned about Hy unday Kia Finance. We are having all kinds of trouble with them. We bought our leased car back in May and as of today October 10, they had not given us the tittle of the car. We paid off the car. "They are by far the most inept organization we had ever done business with". Stay away from them.

How long and successful are the complaints you file? It's a real shame that usually a car is a necessity especially if you are in a rural area and have to travel for a doctor. White collar crime affects blue collar dollars in America

Why don't you explain that yo-yo financing is not necessarily unlawful, and state when dealers may legally require a new car just purchased to be returned if financing falls through, etc.? The article implies that all such situations are unlawful, when they are not.

Sometimes, depending on the sales contract and applicable law, a dealer may require a consumer to return a car if the dealer can't get financing.  

However, the dealer can't have set up the situation knowing it likely wouldn't be able to fulfill the original financing terms. 

And regardless, if financing falls through, the dealer can’t engage in deceptive or unfair practices (like threatening to hold back the customer's down payment) to get the consumer into a new financing deal.

In business many auto dealers cheat to their customer and this is very shameful.

Can anyone answer my question?

My coworker was a victim of this yoyo financing by a car dealership. She did return the car and now they are taking her to small claims court for the mileage she put on the car. High pressure sales tactics on low income women who don't know any better. Something needs to be done about this.

The FTC wants to know about this. Please report it at FTC.gov/complaint. The information you give will go into a database that the FTC and other law enforcement use for investigations.

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