INDIANAPOLIS— Experts are warning consumers about a growing problem among the car-buying industry in Indiana: It's called yo-yo car sales.
It typically happens when a dealer sells you a vehicle on the spot and lets you take it home without having financing secured through an outside lender.
That’s called “spot delivery,” but the yo-yo part comes in when the dealer calls and asks you to return the car.
“They call the consumer and say the financing fell through and you have to bring the car back,” said Andrew Ault, a consumer law attorney in Indianapolis and a member of the National Association of Consumer Advocates. “The financing was done through the dealer; it’s just the dealer was unable to sell the contract.”
Ault said the yo-yo could leave you without a car, without your down payment and some dealers may try to charge you a fee for the time you had the car.
“They want to take the customer out of the market,” said Ault. “They want the trade in, and they want the customer. They want to lock down the deal even though it’s not complete.”
Roberta Gridley of Greenwood wanted a nicer looking vehicle.
"I just wanted something bigger for the family,” said Gridley. “I saw a post on Facebook. It was a dealership, so I was like, ‘you can't go wrong here.'"
Gridley found a white 2007 Lincoln at the Original Used Car Factory in Noblesville, and on January 23 she put $1,000 down, signed a contract and left with her new car.
But things started getting weird when she called the finance company.
“They couldn’t find my account,” said Gridley.
Gridley said she got a call from the dealership saying her financing had fallen through.
The dealer took the car back, but Gridley said they kept her $1,000 down payment, calling it a “rental fee.”
"I'm like ‘this wasn't my rental fee, this was a down payment on a loan you promised me’,” said Gridley. “Now, all of a sudden the loan is not there."
Gridley believes she was a victim of yo-yo car sales.
“It’s a bad business practice,” said Gridley.
A lot of dealers do it, and the Indiana Secretary of State’s office says spot delivery is legal.
“While we are not fans of the practice, it is not a violation of law,” said Valerie Warycha, a spokeswoman with the Indiana Secretary of State’s office. “Without a violation of the law, we cannot take action.”
But consumer law experts say spot delivery opens the door for people to become a victim of a yo-yo sale.
Ault said it could be a violation of truth in lending laws, as well as the Indiana Deceptive Consumer Sales Act.
“It’s highly abusive,” said Ault of yo-yo car sales. "Hopefully the deal goes through, and if it doesn't, they yank them back like a yo-yo."
Ault has successfully sued multiple Indianapolis car dealers for the practice.
Last year, the Federal Trade Commission settled with a California auto group over yo-yo sales, and the company agreed to pay $3.6 million for using unfair and deceptive sales and financing practices .
Ault said in Indiana; often when consumers do bring the car back, they’re offered another deal on a different vehicle.
“They’ll give you a worse car on worse financial terms,” said Ault.
Gridley filed a complaint with the Better Business Bureau, but the BBB says the Original Used Car Factory did not respond to them.
Call 6 Investigates went to the address in Noblesville and found a different dealership in its place.
Records show the Indiana Secretary of State suspended the Original Used Car Factory in Noblesville on April 19 for not having valid insurance.
“As stated in prior communications, failure to timely submit proof of current or continuing insurance would result in suspension of your dealer license,” read the Secretary of State’s letter to the Original Used Car Factory. “As of the date of this letter, we have yet to receive evidence of a new insurance policy.”
In 2017, the Indiana Secretary of State’s office fined the Original Used Car Factory in Noblesville $100 for failing to deliver a title in a timely fashion.
Call 6 Investigates tried to reach to reach the dealer’s registered agent Connor Jones via phone, email and through an attorney, but we have not been able to contact Jones.
As for Roberta Gridley, she ended up going to another dealership to get another car but she wants other consumers to know about yo-yo car sales.
“It needs to be stopped,” said Gridley.
Consumer experts say here’s how to protect yourself from yo-yo sales
- Pay for your car with cash or get your own financing through your bank or credit union.
- Read the contract before you sign it.
- Get copies of all documents you sign.
- Be on the lookout for documents called “spot delivery rider” or “conditional sale rider.”
- Ask the dealer if financing is final or conditional.
- Bring a friend or family member with you.
- Don’t drive a car off the lot without making sure the financing is secure.
If you do fall victim to a yo-yo car sale and you want to get your money back, you can hire an attorney or file pro se in small claims court against the dealer.
You can also file a complaint with the following agencies:
- Indiana Attorney General
- Indiana Secretary of State
- Federal Trade Commission
- Consumer Financial Protection Bureau
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