When you buy a car and drive it off the lot, you may think it's a done deal, but that's not always the case. Consumer advocates are warning about what's known in the car industry as yo-yo financing. Buyers take the car home only to be told days or weeks later the deal fell through and to return the car. "He said once you sign these papers the car is yours," said Lourie Allsbrooks who filed a complaint with the Maryland Office of the Attorney General.
She tells FOX 5 she thought she was getting a good deal. "I wanted the Elantra but he said 'well, let's do the Sonata because they have a rebate on it,' " she said. Allsbrooks put down $1000, traded her old car, signed the paperwork and drove home. But 10-days later it was a deal she'd regret. "They call me and said you either bring $5000 or you bring the car back," Allsbrooks recounted.
A few days later she got a message on her voice mail. It was someone from the dealership, who identified himself as the salesperson. "You need to come here and work out something. If not, they gonna come and take the car from you. Another thing is if you come out with a co-signer, someone who will co-sign for you that would help," the message said.
Allsbrooks didn't have the $5000 or a co-signer and had contacted an attorney. The next morning, the car was gone. She called the police, thinking it was stolen only to discover it had been repossessed during the night and she had no way to get to work. "I loved the car. I definitely love the car. I hate that they took the car," Allsbrooks said.
She completed the purchase and had a signed retail installment sales contract. But there was another document she signed called a buyer's order, saying the sale is "pending approval of financing and if it fell through s/he shall immediately return the car."
State regulations ban "supplemental" contracts added to finance documents stating financing has not been finalized. The attorney general's office wouldn't comment on this specific case, but has said a buyer's order is not part of the retail installment sales contract, and any document that is not, is considered a supplemental agreement. "First of all the regulations that are put out by the motor vehicle administration say that you can't have those kinds of conditional agreements. Second of all most dealerships do not make those agreements clear to consumers," said Karen Straughn, Assistant Attorney General and Director of the Mediation Unit in the Consumer Protection Division.
Consumer groups call this yo yo financing, because it pulls buyers back sometimes after their trade-ins are gone and may pressure them into a new more expensive deal.
Allsbrooks went back to College Park Hyundai with FOX5's undercover cameras rolling to confront them and get her money and trade-in back. "They called me and asked for more money," she tells the salesman who helped her purchase the Sonata. "I don't know. I just sold you the car," he tells her "You want I can get my manager to talk to you. I don't know."
College Park Hyundai responded in a letter from its attorney, arguing the buyer's order Allsbrooks signed clearly states the sale is conditioned "upon securing financing" and is perfectly legal because supplemental contracts, are documents signed at a "later date after" the original sales contract. However the attorney general's office says even documents signed at the time of sale-may be considered supplemental if they change the terms of the sales contract. "If they do not have a full agreement when they leave the dealership they shouldn't be allowed to take the vehicle and that's the problem.," Straughn said.
Last year Maryland's attorney general's office received 51 complaints about yo yo financing or what's called spot delivery because buyers take delivery of the vehicle even if they don't have financing secured. That's up from 38 the previous year. "We do believe it happens more than we even know about," according to Straughn. Dealerships found in violation may be warned or fined.
The rising number of complaints caught the attention of the Federal Trade Commission and it is now looking into the practice. Reports show they typically target those with poor credit and limited income. "If you are called back to the dealership and it said you have to give me another $5000 and then you can have the car, know that you can walk away," said Malini Mithal, Assistant Director of the FTC division of financial practices in the bureau of consumer protection.
Laws vary from state to state. In Maryland car dealers may not sell a trade-in until a sale is final. And if financing falls through buyers have a right to get their trade in and money back as if the deal never happened. The only exception is if the buyer wasn't truthful. Allsbrooks was unaware. "They never told me I could get my old car back or get my money back when they called," she said.
She went back, demanded and got her old car but the dealer charged her $400 for the towing to repossess the car and only refunded $600. Her complaint with the attorney general's office is still pending.
A few weeks later Hyundai sent her a postcard, congratulating her on her purchase and asking for feedback. She no longer had the new car. If she knew they could take it back, she would have told them to keep the Sonata in the first place and taken her business somewhere else.
If you think you were taken advantage of by a yo yo deal, you can file a complaint with the FTC and Maryland's Attorney General's Office.