Consider This from NPR - How Some Dealerships Use 'Yo-yo Car Sales' To Take Buyers For A Ride

Episode Date: February 9, 2023

Negotiating a purchase at a car dealership can be a stressful experience. But once you sign the deal and drive away, the car is yours right? Not necessarily.NPR's Chris Arnold breaks down how some dealerships engage in a practice called a "yo-yo car sale" that can entrap people in bad deals. In participating regions, you'll also hear a local news segment to help you make sense of what's going on in your community.Email us at [e-mail] more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy

So, if you're considering buying a new car, you might want to think again. I think if there's any advice right now is that if you don't have to buy a new car right now, then I would hold off. That's right. That is Greg Brannon, Director of Automotive Engineering and Industry Relations with AAA. And his advice echoes what a lot of people are saying right now, given how expensive new cars are these days. According to Kelly Blue Book, the average transaction price for a new vehicle was almost $50,000 at the end of 2022. That was a record high. And Brandon says buying a used one is also pricier than it used to be. It was just a few years ago you could buy a decent car for $5,000 probably

and it's something that was, you know, relatively reliable. And now that same number at 10 is barely possible. High inflation, ongoing supply chain issues, and persistent demand have all helped make car prices go up. But guess what? Owning any vehicle, new or used, has gotten more expensive too. Ivan Drury is head of insights at the online vehicle marketplace Edmunds. Even if you're not buying something new or used, your continued maintenance and your continued relationship with your car is getting more expensive. Great. So cars are more and more expensive. But let's say that in spite of all of that, you still want or need to buy one. Consider this. What could be worse than paying a lot of money for a car you really need?

Well, paying a lot of money and then not getting the car you really need. Some dealerships are using what critics say are sneaky contract terms to take customers for a ride. That story, after the break. From NPR, I'm Elsa Chang. It's Thursday, February 9th. This message comes from WISE, the app for doing things in other currencies. Send, spend, or receive money internationally, and always get the real-time mid-market exchange rate with no hidden fees. Download the WISE app today or visit WISE.com. T's and C's apply.

It's Consider This from NPR. A vehicle is the second biggest purchase many Americans make in their lifetimes after a home. For some, it is the biggest expense. So obviously, you want to avoid scams. But some car dealers engage in a practice called yo-yo car sales that can entrap people into bad deals. NPR's Chris Arnold has found it happens more than you might think. And right now, the federal government has a chance to crack down. If you've ever bought a car, you know that feeling when you've signed all the paperwork, driven off the lot, and you're like, wow, this is actually my car now. That's how Courtney Johnson felt. Well, I was excited. You know, like,

I felt like I'd made a good decision as a mother. Johnson had just had a baby when she and her husband Darren decided to buy a newer, safer car for the family. They live an hour outside of Orlando. He's a fire sprinkler inspector. She's stopped working to raise the kids. And they bought a little used Hyundai SUV. It had the backup camera. It had all the passenger and the kids' airbags in the back. It was an all-wheel drive car, so it did fit a lot of the safety features that we were looking for. But three weeks later, after the Johnsons had bought the car and taken it home, they got what's called yo-yoed. I received a phone call from the finance manager of the dealership.

He told them that the financing for the car had fallen through, and if the Johnsons wanted to keep it, they had to come back and sign a contract with different terms. I was kind of confused. I thought this was a legally binding contract. You know, we've already drove off the lot. We've had this vehicle at home. You know, what do you mean it's not financed? Most of us would be confused, too. But if you've bought a car, odds are good that in the paperwork, there was some legal language saying basically that if the car dealer has trouble with the financing on their end, they can later cancel the deal. They can try to get you to agree to different terms and take the car back if you don't go

along with it. It's called a yo-yo sale because they pull you back after you've already bought the car. NPR sent a survey to consumer attorneys who work on auto cases. Forty of them responded. And together, just those few dozen lawyers said that they've gotten calls from nearly 900 car buyers in just the past year who say that they fell victim to one of these yo-yo car sales. In the Johnson's case, we did end up going to the dealership. He had a second contract laying there highlighted. I didn't feel like they

were being very honest with me. The new deal raised the price of the car, paid less for their trade-in, and removed an insurance policy they had in the first deal. But the Johnsons agreed to it to keep the car. But then the dealer called them back again, saying they had to sign yet another deal. And the Johnsons thought the whole thing just seemed really fishy and said, forget it, we're not going to do that. And the dealer sent a tow truck and repossessed the car. Meanwhile, the dealer had already sold off their trade-in vehicle and didn't give it back. We both were just kind of like mind blown at the whole entire situation. Like, how is this even possible, you know? The dealership wouldn't answer their calls and it didn't pay off the loan on their old car. It just basically took

their old car. So they were stuck paying the loan with no car for close to a year. They eventually used a chunk of their small retirement savings to pay the loan back. I just remember being like embarrassed, confused. And amongst that period of not having a ride, I was like counting out change, trying to give friends money for like gas to get places. The Johnsons sued and eventually won. But in NPR's survey, the consumer attorney said about half the time the dealer tells the customer it's too late to get their trade-in vehicle back. So what happened to the Johnsons? It is not a one-off random thing. It does happen all too frequently.

John Van Alst is an attorney with the National Consumer Law Center. He says usually when you finance a car through the dealer, technically you owe the dealership the money for the car. But basically, they want to quickly sell your loan off to, say, the credit arm of Ford or Toyota or some other auto lender. And that's why they often put in the fine print that if they have trouble doing that, they can undo the sale and take the car back from you. They want you to feel bound by the contract, but they want to be able to walk away. Van Alst says to get you to buy the car, the salesperson might agree to a monthly payment that's too low. Sometimes the car dealer made a mistake and thought they'd be able to find a lender. But oftentimes it's used as a technique by dealers to try to force consumers into a worse deal. In other words, the salesperson

knows the payment is too low. The deal is too good to be true, but they let you think you've bought the car anyway. You've signed all the paperwork, you go home, you show it to your friends, your family, and then they call you back a day or two later and say, oh, no, you're going to have to accept a 8% higher interest rate. And at that point, it's a whole lot more difficult for the consumer to walk away. The dealer might have already sold their trade in. That's called unhorsing the car buyer because they don't even have their old trade in car anymore.

So they are then sort of at the mercy of the car dealer. All this is especially relevant right now because the Federal Trade Commission is crafting a new set of rules for car dealers nationwide, and it could crack down. In requesting public comment for its rulemaking, the FTC is asking directly, should we do something specifically to address the problem of yo-yo car sales? Consumer advocates emphatically say yes, but the industry says no. Paul Mitri is with the National Automobile Dealers Association. He says there is nothing wrong with these sales contracts that give dealers the right to cancel the sale later. We're really talking about a situation where you have tens of millions of transactions where this happens all the time. Mitri says most dealers try to avoid calling people back and rarely do because if the buyer

walks away, the dealer gets stuck with a car with more mileage on it, making it worthless. And also, and perhaps most significantly, you have an unhappy customer. The reputation of the dealership is key. The dealer association says car buyers like the current system the way it is, and changing the rules would create unnecessary delays. Of course, Mitri says there are always going to be bad actors at some dealerships, but... To the extent there is an issue, it's something that can be addressed under current federal and state law. Still, NPR has found that tougher rules for dealers can make a difference. In 2015, a lot of crackdown on yo-yo sales went into effect in Maryland. It says after four days, a car sale is final,

and that dealers can't sell your trade in until then. NPR obtained complaint data from the state AG's office, and it shows that complaints about yo-yo car sales have since fallen by more than half. And with yo-yo sales, there are sometimes some pretty bad outcomes. NPR spoke to two different car buyers, but the dealer actually reported the car stolen after the buyer resisted bringing it back or signing a second sales contract. One night I'm just driving, and next thing you know, I get pulled over by the police. I got my girlfriend in the car, my little brother. Andre Flint bought a Camaro about a year ago from a used car dealer near Cleveland.

But then he says he got tangled up in a yo-yo sale situation. The dealer was trying to get him to bring the car back. Flint said he would, but then he didn't. And the dealer reported the car stolen. Flint says when the police pulled him over, he had the paperwork showing he bought the car legally. They got me at the back of the car. One officer's talking about why is he pulling me over when all the paperwork and everything is in my name? And I'm like, it's so many cop cars behind me, it looked like I robbed a bank. Flint says it was scary. Because it's like, you know, no offense, I'm Black too. So it's like any slight movement, anything, man, it could have been just all downhill. And,

you know, it was just, it was terrifying. It shook my girl up because we didn't know what was going to happen. The officers arrested Flint and he spent two nights in jail before he managed to sort it out and get released. Nobody should have to go through something like that when you actually didn't do anything, man. In a letter to the Federal Trade Commission, 18 state attorneys general urged the FTC to do more to stop the harm caused by yo-yo sales. They said the FTC should consider an outright ban on dealers allowing consumers to take a vehicle before the financing is really final. That was NPR's Chris Arnold. It's Consider This from NPR. I'm Elsa Chang.