FTC to auto dealers: don’t toy with yo-yo financing
October 03, 2016 / Source: FTC
September 29, 2016
by Colleen Tressler, Consumer Education Specialist
Buying a car can be exciting, but what if there are strings attached? Some buyers told us that they financed a car through a dealership, signed a contract, and drove the car home, only to be told that the financing didn't go through and they had to sign a new deal or lose their down payment. There’s a name for that: it’s called a “yo-yo” financing tactic. It’s just one of a trunk-load of charges the FTC is bringing against Sage Auto Group, a group of nine Los Angeles-based auto dealerships, and the three brothers who control them.
The FTC alleges that Sage Auto engaged in a host of yo-yo financing tactics. For example, Sage Auto allegedly told customers the contract was cancelled, but the dealer would keep their down payments or trade-ins if the customers refused to sign a new deal. The dealerships even threatened some customers with arrest, criminal prosecution, or vehicle repossession if they didn’t take the second deal – even when the original deal was still valid.
As if yo-yo financing isn’t egregious enough, the FTC also alleges the defendants packed on extra charges for aftermarket products and services, like extended warranties, guaranteed auto protection, and service plans, without customer consent. Sometimes, Sage Auto falsely claimed the products were required as part of the sale or financing or were being thrown in for free. In reality, Sage Auto was adding those charges into the amount financed by consumers.
The FTC’s complaint also says Sage Auto used phony online reviews to tout their dealerships and to try to discredit negative reviews about the company’s bad advertising, sales, and financing practices. Potential customers rely on online reviews to decide where to shop, and Sage Auto undermined that ability with phony reviews written by its employees and other people tied to the dealerships. The FTC’s lawsuit seeks a court order to require Sage Auto to stop these bad practices and give refunds to some customers.
If you’re in the market for a car, don’t let deceptive sales, financing, or leasing practices leave you spinning your wheels. To find your best deal, shop around and compare offers from different dealers and financing sources like banks or credit unions. And check out our free publications about buying and owning a car before you start shopping.