Chicago Bankruptcy Lawyer Blog

Car dealerships have gotten, and continue to get, a bad rap. The truth is that the majority of dealerships are honest and reputable, but it only takes a single bad experience to perpetuate the myth. Even so, it couldn’t hurt to be a smart consumer, just in case you visit that one dealership in your neighborhood which gives credence to the claim that car dealers are not honest.

Car dealers have a tendency to look smarmy; always smiling and grinning, bobbing their head up and down like one of those brown velvet bobble-head dogs you see in the back of big old Buicks. But I can deal with all that; I know that most of them see us only as dollar signs, a commission waiting to be gained. A good haggler will be able to see through the charm, and get a good deal on the price of the car.

But what if you not only want a good price on a car, but a good interest rate on the car financing? And what if your credit stinks? That smarmy smiling dealer will tell you, “Not a problem.” But, don’t be fooled. Yes, it is.

A disreputable car dealership may be setting you up for what is known in the scamming circles as “yo-yo financing.” You know how a yo-yo works, right? The yo-yo goes down, then comes right back up.

How the scheme works is this. Your credit stinks, but your dealer assures you that you’ve pre-qualified for an excellent interest rate, so you can just drive right on off the lot with the car of your dreams, and they’ll get the loan documents prepared in a couple of days and you can come in and sign them then. You’ll hear a lot of “Don’t worry” and “No problem.”

Now, you are psyched! When the dealer gave you the good news, you might have raised your eyebrows a bit, but then you started thinking to yourself, “Wow, I didn’t even think I was gonna be approved. Man! This place is great!” And the dealer is looking first at the incredulity on your face, then at your joy, and he’s thinking, “Heh, heh, heh! I got you! Sucker.” Before you even have the chance to think all this through, the dealer has put a temporary plate on the car, so that you can take it home.

So, off you drive with your dream car, showing it off to your buds, racking up the miles, enjoying the good life. And a couple of days later the phone rings. It’s the dealer and he says, “There’s a little bitty problem with your loan application”. And he goes on to say that they can’t give you the rate that they thought they could give you, it’s gonna be a bit higher than that – in truth, maybe even more than just a bit, maybe a lot higher. The only thing you can do now is to go back to the dealership, give them some more money towards your down payment (because you have, after all, used the car and it cannot be returned to the dealer. If you don’t come up with the money within a couple of days, they’ll come after you.

What choice have you got? You’ve taken possession of the car already. It’s yours, for better or for worse. You took the bait, remember?

Before you put yourself into that situation, consider this advice: Don’t drive the car off the lot until you’ve completely read through, fully understand, agree to all terms and conditions, and signed the loan documentation. And most importantly, watch for the “yo-yo” disclaimer, usually written in bold print, which basically states the dealer has the right to rescind the contract if they cannot find a lender who will agree to the original financing terms.

Best advice: Leave the business of lending to a reputable lender, not a car dealership.

-- Debt Diva for DebtStoppers