There's this thing that shady car dealer's like to do - it's called the Yo-Yo scam. A dealer sells you a car but then calls you back for one reason or another and asks for more money or to sign a new contract or to return the car. At this point, you have become attached to the car and feel like you have no other choice but to do what the dealer wants.
The dealer never cut the string between you. He releases you from his lot only to snap you right back before you get too far away. Yo-Yo.
Just yesterday I met with a nice couple who bought a used car and the dealer told them they were financed, but they weren't. After two weeks, the dealer called and said he needed another $1,500 to get them financed. They asked the dealer to take the car back, but surprise, the dealer said he couldn't. (This is a big fat lie.)
After two months without financing, the dealer finally asked for the car back, but said they would have to get their down payment from the lender. What??? There is no lender! (Another big fat lie.)
The whole point of this yo-yo scam was to take the buyer's down payment and as much money after that as possible, and then take the car back and keep their money. I've seen dealer's run this scam with the same car over and over again, stealing money from hard working people without a thought as to the hardship they are causing.
The best way to avoid this type of scam is to know your rights.
1. If the dealer calls you after the sale and wants something more, you have the right to say no.
2. If the dealer wants you to sign a new contract, you have the right to say no.
3. If the dealer withholds your car registration or title until you pay more money, you have the right to say no.
4. If the dealer can't get you financing and takes the car back, he is required to give you all of your money back.
If you are a victim of a yo-yo scam, I encourage you to report the dealer to your local DMV Investigations Unit. They will investigate the dealer and have the authority to put them out of business if they repeatedly violate the law. They can encourage the dealer to pay you back. If the dealer doesn't, then contact an auto sales fraud or lemon law attorney for help.
When you buy a used car, a car dealer is required to give you a "Buyers Guide" to inform you whether the car is being sold with or without a dealer warranty. If the "AS IS" box is checked, then the dealer is not providing a warranty for the car. If the "DEALER WARRANTY" box is checked then the dealer is providing a warranty for the car for the length of time and/or miles stated on the Buyers Guide.
However, if you buy an “As-Is” car from a dealer, the sale really is not “As-Is.” “As-Is” means the dealer is not giving you an express warranty for the condition of the car, and the car does not come with any implied warranties. Essentially this means that if the car has mechanical troubles, the dealer has no obligation to fix them.
But, a dealer must always sell cars that meet certain minimum requirements. It must be safe, and it must work (get you from point A to point B).
Every used car dealer is required to perform a safety inspection of each car it sells. This includes working brake and head lights, horn, wipers, seat belts, adequate brakes, adequate tire tread, etc.
If your car has any safety defects, you may have the right to ask the dealer to repair them or buy back your car.
If you purchase a car from a private seller, the sale truly is “As-Is.” The car could break down a block away and the seller is not liable. However, a private seller is required to smog the vehicle no more than 90 days before the sale. Be sure to ask for the smog certificate.
What happens when your car is repossessed? Most people don’t really know. Many people think that the bank just takes the car, sells it, and then cancels the loan. Nope. And don’t count on the lender explaining the consequences of a repossession to you.
Don't want to read the whole blog? Here are some QUICK FACTS:
Here’s how it works.
A lender (or other lien holder) can repossess your car for a number of valid reasons, such as late car payment, lack of insurance, use of the vehicle in a crime, intentional misuse of the car (such as drag racing). The car goes to a tow yard and you have to act quickly to get your personal property back. They will charge you money for the storage if you don't act quickly. And, be sure to get your purchase documents out of the glove box while you're at it.
Ok, back to what I wanted to write about in the first place. What happens if you can’t pay to get the car back? The lender will sell the car at an auction sale and they won’t ask for top dollar. Once sold, the lender will notify you that you still owe money on the loan. No, the lender doesn’t just cancel the loan and walk away. They want the “deficiency” balance from you, and they will sue you for it. The sale only lowers the amount remaining on the loan; it usually does not wipe it out.
For example, say you owe $20,000 on the loan. The lender wants $1,800 to reinstate the loan and get your car back. You don’t have the money so you ignore the problem. The lender sells the car at auction for $12,000, leaving a balance of $8,000 on the loan. This is the “deficiency” balance, and you owe it. You don’t have the car, but you still owe the money left on the loan. If you don’t pay it, the lender has the right to sue you to get it. Then you’ll owe the $8,000 plus attorney’s fees and costs to file suit against you.
Don’t you wish you had paid the $1,800?
Voluntary Return of the Vehicle to the Lender Is Still a Repossession!
Sometimes a person just can’t make the car payment anymore and calls the lender to ask for help. The lender might say, ok, just deliver the car to us and you think you are free and clear. What the lender won’t tell you is that this is still considered a repossession! It’s voluntary, but it is a repossession. You will go through exactly the same process as if they forcefully took your car in the wee hours of the morning, including the likelihood of owing a deficiency balance and having a repossession on your credit report.
If a lender orally tells you that you can make your car payment late, your car might still be repossessed. It will be your word against theirs. If it isn't in writing, then you have no proof of this agreement.