Approved Then Denied: Yo-Yo Financing

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Content Manager

Bethany Hickey is a Content Manager and Writer for Auto Credit Express, CarsDirect, and many other automotive blogs. She's a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. 

, Content Manager - July 7, 2021

If you were told you're approved for a car loan to only be told later on that your application was denied, you might have fallen into a situation called yo-yo financing. Here’s how a yo-yo financing can cause you headaches, and the signs that you may be tangled up in one.

What Is Yo-Yo Financing?

Yo-yo financing, also called spot delivery, is a tactic where a dealership tells you that you’re all set for auto financing and you’re able to take the car home – before the financing paperwork is actually completed. A few days later, or maybe even a few weeks, the dealership may call you to let you know that “your financing fell through, you need to come back up here to figure it out.”

A consumer may be told that they were denied the auto loan, and now things need to be changed in order for them to keep the vehicle. Often, once a consumer returns to the dealership, the car loan they originally applied for (and told they were approved for) is renegotiated. Many times, it means getting a higher rate or monthly payment than what they were originally slated for.

Spot deliveries are often called a scam. This practice is illegal in some states, but not all, and regulations vary. Many borrowers with less than perfect credit are scooped up in it. A borrower with credit challenges may hear the words “approved” and be over the moon that they get to take a vehicle home. Unscrupulous dealers may take advantage of this enthusiasm, so it never hurts to be cautious of a deal that sounds too good to be true.

Not only can yo-yo financing be time-consuming, but it can also put a strain on your mental health. One minute you’re told you’re all set and you get to take the car home, and the next, you’re having to drive back to the dealer and hoping that you get to take it back home. To protect your wallet and sanity, it’s important to be able to spot yo-yo financing.

Avoiding Spot Deliveries

It’s important to keep your wits about you when buying a vehicle and never leave a dealership with a vehicle until you’re 100% sure that the financing is done.

If all you do is sign the car buying paperwork, and don’t see anything regarding financing, that should be considered a sign that you may be in the middle of yo-yo financing. Another sign could be if the dealer tells you that you can “Take the car now – we’ll handle the financing, you’re all set.”

A good way to avoid yo-yo financing is by getting a preapproval, then heading to a dealership. This way, you know that you’re already approved for a loan, know your maximum finance amount, possibly your projected interest rate, and you can drive the car home without worrying about financing falling through because it’s already done. However, many bad credit borrowers can struggle to get a preapproval.

If you have poor credit and need assistance from a special finance dealership, then you may be in the clear, too, if you seek out a subprime auto loan. Typically, you need to be eligible for a subprime car loan before you even choose a vehicle. A subprime lender sends the special finance manager a payment call, which is the maximum monthly payment you qualify for. Once you have that, you choose a car, make a down payment, and complete all the paperwork before you can take delivery.

Finding the Right Dealership for Your Credit

Choosing a dealer that can assist you with your vehicle needs can be stressful, but we want to make your search for an auto loan easier with our free services. Here at CarsDirect, we’ve created a coast-to-coast network of special finance dealerships that assist with many unique credit challenges, and we want to connect you to one in your local area with no obligation.

Start the search for a vehicle by filling out our free auto loan request form today!


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, Content Manager

Bethany Hickey is a Content Manager and Writer for Auto Credit Express, CarsDirect, and many other automotive blogs. She's a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. 

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