Auto loan scammers, or “yo-yo” scammers, are a serious problem in the United States. These scammers work by offering a very low interest rate at the beginning of the conversation, only to raise the rate once the driver has signed the contract.

This can leave consumers confused and frustrated, and often leads to them paying more for their car than they originally agreed to. But there are a few steps you can take to avoid being tricked by a yo-yo scammer and educating yourself is key.

What is a yo-yo scam?

A yo-yo scam occurs when you go in to discuss a car loan. The dealership might offer you an auto loan with a very low interest rate at the beginning of the conversation — usually a rate that is much lower than normal. The rate might sound too good to be true, and it usually is.

You will be asked to sign documents with the lower rate listed, but a few days, or even weeks later, you’ll get a call or an email saying that the dealer can’t offer you that interest rate. They’ll also say that you need to renegotiate — or else the offer will be rescinded completely.

The newly negotiated interest rate is typically much more expensive than the original loan, making for a confusing and frustrating experience. When you ask about the rate hike, it is likely that the dealer will say that you didn’t qualify for the initial interest rate, despite originally leading you to believe you did.

This back and forth is where the scam gets its name. You’re let go with the car, then pulled back in like a yo-yo.

How to avoid yo-yo financing scams

Following these four steps will help you avoid yo-yo scams.

  1. Read the fine print. Even if you think you have a good grasp of what potential costs will be in a financing contract, read the fine print. Look for terms like “conditional” and what they mean if you don’t fully understand the context. If a rate or price is provided that’s higher than the original quoted, ask why.
  2. Avoid excessive or unnecessary charges. It’s possible for a dealership to tack on additional charges to your final loan amount, resulting in higher payments. If you’re unsure of this, ask for a copy of the final paperwork, including the add-ons, before signing anything.
  3. Don’t agree to an auto loan until you’re ready. A lot of people are tempted to get their car as soon as possible. But financing the car at the dealership may lead to increased pressure from the salesperson. It’s better to have the financing to pay for the vehicle in full lined up before you even step foot in the dealership.
  4. Don’t be afraid to walk away. This is always an option. And if you do decide to walk away from the dealership, be sure to note down what caused you to leave so that you can keep those flags in mind for the next dealership you head to.

Ultimately, if you want to avoid yo-yo financing scams, you can always skip financing at a dealership completely. With online lenders, you can get prequalified and find the best loan option without ever leaving your home.

What to do if you fall victim to a yo-yo scam

There are a few immediate actions you can take when a dealer tells you your financing has been denied.

Review the purchase contract

Check if the contract is a conditional sales agreement. If it is, you may be able to return the car and receive any money you put down along with your trade-in, if you made one.
If the dealer already sold your trade-in, you should receive the cash amount of the sale. And if the dealer refuses to refund the amount, you should contact your state attorney general’s office immediately.

Request the denial letter

Ask for the letter from the lender denying your auto loan request. If the dealer won’t provide it, you should likely back out immediately.

See if you can secure your own financing

If you, understandably, want to keep the car, see if the lender will give you the out-the-door price. From there, you can see about securing your own financing with an online lender, bank or credit union.

How to report the scam

You can report yo-yo auto loan scams to the Federal Trade Commission (FTC) online or by phone. When reporting, you will need to provide personal information to help authorities identify you. You can also contact your state attorney general’s office for more assistance.


To begin, visit the FTC’s online complaint form at Select “Get started now” to get to the form. From there select “Auto sale, repair” and the type of problem that best fits. You will then be directed to another page where you can provide more information about the scam, including the company and names of people you’ve spoken with.

Once you submit the complaint, it will be reviewed and assigned to an investigator, who will investigate the scam and potentially contact you to ask for more information.


You can also contact the FTC by telephone at 877-382-4357. The call will go to the FTC’s Consumer Response Center.

The bottom line

Auto loan scammers are an unfortunate risk that comes with vehicle shopping, so it’s important that you do your homework before you sign on the dotted line. Be sure to educate yourself on the features of these loans and ask lenders to explain any questions you have along the way. Finally, if you believe you have been the victim of a yo-yo scam, report it.

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