One of the worst things that can happen when buying a new car is finding out that you didn’t actually get approved for it after the fact. Some car buyers are catching on to the bullshit sales tactic and fighting back, like one customer who’s suing the dealership that screwed him over with “yo-yo financing.”
Before we get into what happened, let’s briefly touch on yo-yo financing, which we’ve covered before. Basically it’s when a dealer allows you to put a downpayment on, sign for, and leave with a vehicle even though you actually haven’t been officially approved for the loan. That lack of approval is generally not known by the customer. Then a short time later this happens:
But a week or so later, the dealer calls you saying that, in fact, you haven’t been approved. Depending on the dealer, one of two things will happen: they’ll tell you to bring the car back and they’ll either return your down payment, or they’ll say you need to agree to higher financing terms. Any way you go about the situation sucks — you’ll either be without a car or paying substantially more than you originally agreed to.
Different states have different grace periods for when a dealer is required to let a customer know about their denial. The FTC views the practice as deceptive. That brings us to Gilbert Rodriguez’s situation. In September 2023, Rodriguez went to Chevrolet of Milford in Connecticut and purchased a 2018 Kia Sorento, as Automotive News reports:
According to the May 1 complaint, Rodriguez completed a credit application, was told it was approved, signed a purchase contract, paid $2,000 down, assigned ownership of his $500 trade-in to the dealership and was given the Sorento.
Ten days later, Milford contacted Rodriguez asking for a pay stub, which he gave them. Nearly a week after that the dealer told Rodriguez he had been denied. Rodriguez tried keeping the car by saying he would give them $1,500 more on the down payment, but Milford said no, that he needed to bring the Sorento back. So Rodriguez did a voluntary repo and the dealer refunded his downpayment. Things got worse when it came to his trade in: Milford already sold it, and according to the complaint this left Rodriguez “with no transportation,” and Milford didn’t compensate him for the sale of the trade-in.
In a statement to Auto News, Milford’s lawyer said the dealer disagrees with how certain things are being presented, because of course they would. That’s probably because Milford may have been up to no good. According to the suit, Milford retook the Sorento because they couldn’t find a third party lender to approve Rodriguez and the dealer “did not want to be bound by the (retail installment sales) contract.” The dealer also may have misled the DMV in the process as well, from AN:
In addition, to be able to resell the Sorento with a clean title, the suit said the dealership “submitted a false statement of withdrawal” to the state Department of Motor Vehicles and “falsely certified that the ‘customer never took delivery of the vehicle.
So remember, if a dealer says you’re approved, make sure you check to see that you’re actually approved before you leave with that car.