A new study says car dealers use "yo-yo" or "bait and switch" scams to trick potential buyers into accepting a higher financing rate than they originally agreed to. Worse than that, the car dealers often targeted people with poor or no credit scores. As if we needed another reason to give car salespeople the side eye.
In the scheme, a salesperson tells a potential buyer that financing is set. Later, the dealer notifies the person that the financing “somehow” fell through, and gets the consumer to agree to a higher interest rate than what was originally agreed upon. The Center for Responsible Learning, a non-profit organization that works to end financial scams, reports that of the 2,100 people taking part in their survey, 27 percent had experienced a “yo-yo” like situation and of those people, 40 percent had poor or no credit.
The takeaway from this depressing news? Do your research. If you’re shopping for a car, attempt to get pre-approval from an outside lender, like your local credit union, so you walk in the dealership with financing in hand. Then the onus is on the dealership to offer a better interest rate – otherwise, you stick with the offer you’ve already secured. And be sure to always negotiate the price of the car and the financing separately. You can do that by waiting to share your plans for paying until after you’ve settled on the price of the car.