Auto Sales Fraud
Here's the condensed version of this nationwide swindle. You bought a new car. You've been driving it for a couple weeks. It's great. It doesn't ping going up the smallest hill. It's pretty. Your pals don't snicker when you pick them up for your weekly golf game. Then you get the phone call.
"This is Joe over at the dealership. There's a problem with the financing on your car."
[The Yo-Yo Sales Scam]
It is anxiety time: What went wrong? At the dealership you are told the lender turned down the loan and if you want to keep the car you're going to be looking at a much higher interest rate than the interest rate (bait) originally offered. That's right, bait; this is after all, a variation on the old bait and switch con. As an alternate to the higher interest rate loan, they may want you to come up with two or three thousand or more in cash. If you don't have the cash, which most people caught in this mire of financial skullduggery do not, it's over to the higher interest rate on your loan.
You took the car off the dealer's lot before the financing was approved by the lender. Like any good bass fisherman, the salesman waited till you'd run with the bait before they gave you the call and set the hook. After that you were reeled in. You were set up for the scam.
When you pick up a car immediately after negotiating a deal, but before the final approval of financing arrangements, it is called Spot Delivery. Getting called back in because of an alleged financing issue is called a "Yo-Yo sale".
Essentially, the dealer gets another chance at negotiating a deal that you thought was already settled. The majority of the time, the markóthat's con man slang for suckerówill sign up for the new deal, which inevitably contains a much higher interest rate.
The sales person may execute this ploy more than once if he senses that the consumer is desperate enough. The sales person will tell you that he or she has done their very best, but it isn't up to him. The reason for the rejection will be the consumer's credit rating. Of course no mention of the consumer's shaky credit will have been made when the deal was first offered.
That's it in a nutshell. This is just one of many auto dealer frauds.
During the Yo-Yo scam a number of variations of the basic deception may be tried on the consumer. Some of them have their own names in the lexicon of sales trickery, such as "Stealing the Trade-In". This happened to Bradley Nigh of Lexington, Virginia in a classic Yo-Yo sale that happened in 2,000. Three weeks after he took "Spot Delivery" of his new vehicle, he was yanked back with news that his financing fell through. When he asked for his trade-in back he was told that it had already been sold. To add insult to injury, when Mr. Nigh protested having to renegotiate his loan, the dealer threatened to have him arrested for auto theft. Mr. Nigh's case went all the way to the Supreme Court.
Yo-Yo financing cannot be legislated out of existence. It is a manipulative deception, not a currently permitted financing method. In a Yo-Yo sale dealers play games and lie to manipulate consumers either in saying a deal is financed (when it isn't and may not or will never be financed) or to say a deal could not be financed (when in fact it is.) And therefore a consumer must sign a subsequent contract. The object of the deception is always to force the consumer into the subsequent contract.
Certainly fraud attorneys will do what they can, but it is not easy. One thinks of the sailor's prayer. "Oh Lord, your sea is too big and my boat is too small." It is the same with the Lemon Law as with sales fraud. We know with certainty that for every Lemon Law case we take there are hundreds of defective vehicles out on the highways and byways struggling to get through a week without another trip to the dealership for repairs.
Also the legal solution is at the wrong end of the chain of events. Often it must seem as though the attorney is trying to close the barn door after the horses have escaped. It is, of course, essential that attorney's take fraud cases. This work must be done, if for no other reason than that there must be referees at games to keep the players honest.
Regrettably, public education is the only way to create long-term beneficial effects on the dealership sponsored sales fraud that occurs every day in every state in the United States. I say regrettably because if we cannot teach our children how to read and write, how are we to teach adults something as essential as purchasing a car.
I know how to do it, that is not the problem. Teaching requires a person with a lesson plan standing in front of students who are interested with something valuable to teach. As someone who has taught adults, I can tell you it is certainly as much fun as teaching children. The internet and assorted print magazines have articles and even books that tell the consumer how to avoid the predatory sales practices found at most car dealerships. How many people read them? If the Science of Super Heroes is the standard for degree courses at the University of California, Irvine surely there is room for a decent course on how to buy a car without being ripped off in the U.S.
If you have to ask why teach people the right way to buy a car, you have missed the point entirely. Aside from the moral aspects of fraud, consider the cost. I don't have the resources to determine how many instances of sales fraud occurred in California this year, much less the rest of the country. But I'd feel safe in estimating the cost to the country in the hundreds of millions of dollars.
Such courses need to start in high school. Most states allow their citizens to get a license at 16 years old. If you are depending on Dad or Mum to take care of this teaching chore, think again. They are already engaged in trying to make enough money to keep up with the negative equity on their own cars.
The idea is to trap the consumer and deny them the ability to shop for credit.
The average car buyer is ignorant of the ways of the credit industry. The buyer should have taken the time to study the whole process. However, in a desperate attempt to keep the family together, fed, clothed, and in school, this important simple skill of buying an automobile isn't learned.
As a result of this sales flim-flam, the informed negotiation process mandated by the Truth in Lending Act (TILA) is replaced by a devious and fraudulent dealer-controlled, high pressure sales scam.
There are many things the car buyer can do to prevent being swindled. The one piece of advice that every person writing on the subject has at the top of their list is:
Get your own financing. Go to your bank, credit union or your uncle Harry if you have to, but arrive at the dealership with your own financing.
by Donald P. Ladew Staff Writer
Norman Taylor & Associates