How to Avoid a Yo-Yo Auto Loan Scam

Car loan scammers, or “yo-yo” scammers, are a serious problem in the United States. These scammers operate by offering a very low interest rate at the start of the conversation, only to increase the rate once the driver has signed the contract.

This can leave consumers confused and frustrated, and often results in them paying more for their car than they originally agreed. But there are a few steps you can take to avoid being tricked by a yo-yo scammer and educating yourself is key.

What is a yo-yo scam?

A yo-yo scam happens when you walk in to discuss a car loan. The dealer may offer you a car loan with a very low interest rate at the start of the conversation, usually a much lower rate than normal. The rate may sound too good to be true, and it usually is.

You’ll be asked to sign papers with the lowest rate listed, but days or even weeks later you’ll get a call or email saying the dealership can’t offer you that interest rate. They will also say that you have to renegotiate, otherwise the offer will be canceled completely.

The newly negotiated interest rate is usually much more expensive than the original loan, creating a confusing and frustrating experience. When you ask about the rate hike, chances are the dealer will say you didn’t qualify for the original interest rate, even though they initially made you believe you did.

How to avoid yo-yo financing scams

Following these four steps will help you avoid yo-yo scams.

  1. Read the fine print. Even if you think you have a good idea of ​​the potential costs of a finance contract, read the fine print. Research terms like “conditional” and what they mean if you don’t fully understand the context. If a rate or price is higher than the original quoted, ask why.
  2. Avoid excessive or unnecessary charges. It is possible for a dealer to add additional fees to your final loan amount, which will result in higher payments. If you are unsure about this, request a copy of the final documents, including add-ons, before signing anything.
  3. Don’t take a car loan until you’re ready. Many people are tempted to get their car back as soon as possible. But financing the car at the dealership can lead to increased pressure from the seller. It’s best to have the financing to pay for the vehicle in full before you even set foot in the dealership.
  4. Don’t be afraid to walk away. It’s always an option. And if you do decide to walk away from the dealership, be sure to write down what made you leave so you can keep those flags in mind for the next dealership you visit.

Ultimately, if you want to avoid yo-yo financing scams, you can always skip financing at a dealership altogether. With online lenders, you can be prequalified and find the best loan option without ever leaving your home.

What to do if you are the victim of a yo-yo scam

There are a few immediate actions you can take when a dealer tells you your financing has been declined.

Review the purchase contract

Check if the contract is a compromise of sale. If so, you may be able to return the car and receive all the money you deposited with your trade-in, if you made one.
If the dealer has already sold your trade-in vehicle, you should receive the cash amount of the sale. And if the dealership refuses to refund the amount, you should contact your state attorney general’s office immediately.

Request the rejection letter

Ask for the letter from the lender denying your auto loan application. If the dealership doesn’t provide it, you should probably pull out immediately.

See if you can get your own financing

If, of course, you want to keep the car, see if the lender will give you the door price. From there, you can see how to secure your own financing from an online lender, bank, or credit union.

How to report the scam

You can report yo-yo auto loan scams to the Federal Trade Commission (FTC) online, by phone, or by mail. When reporting, you will need to provide personal information to help authorities identify you. You can also contact your state attorney general’s office for assistance.

In line

To get started, visit the FTC’s online complaint form at After providing some information about the yo-yo scam you fell victim to, you can select the “Autos” area as the category in which to report the scam. From there, select “Other” as the subject and “Auto loan, lease, or refinance” as the specific type of scam. You will then be directed to another page where you can provide more information about the scam, including the scammer’s email address, phone number, and names of people you have spoken with.

Once you submit the complaint, it will be reviewed and assigned to an investigator, who will investigate the scam and possibly contact you for more information.


You can also contact the FTC by phone, Monday through Friday, 8 a.m. to 5 p.m. ET, at 877-382-4357.

To post

Finally, you can also complete and mail the FTC’s online complaint form. After you complete the form, it will be reviewed and sent to an agent for further investigation, but it may take some time for the investigator to contact you.

The bottom line

Car loan scammers are an unfortunate risk that comes with buying a vehicle, so it’s important that you do your homework before signing on the dotted line. Be sure to educate yourself on the features of these loans and ask the lenders to explain any questions you have along the way. Finally, if you think you’ve been the victim of a yo-yo scam, report it.

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