Spot Deals (Yo-Yo) Explained


There are two primary ways to purchase a vehicle under Pennsylvania Law:  pay cash or finance.  In a typical Vehicle Finance Agreement, or Retail Installment Sales Contract, the dealership acts as the bank entering the Agreement to “loan” you the money needed to buy the car.  However, if the dealership holds that loan, it take a long time for the dealership to make any profit on the sale.  As such, customary practice is for the dealership to instantly sell your finance agreement to another bank.  Basically, that new bank pays the dealership for your car and then collects the money from you.

The dealership’s ability to sell the finance agreement to another bank requires the bank’s approval to extend you financing based on your employment, monthly expenses, and credit score.  Sometimes, in order to make a sale, the dealership will sell you the car, but the new bank will refuse to buy the debt.  This is called a “spot delivery” because the dealership entered the agreement on the spot without pre-approval.  If another bank refuses to take over the finance agreement, under Pennsylvania Law, the dealership must continue to be the collector under the finance agreement.  However, again, this means a lot more work for the dealership and a long time to make a profit.  As such, almost every dealership will try to contact you and tell you that your deal fell through and you need to return the car.  This process has become known as a “yo-yo” deal.  The dealership enters an agreement with you, sends you on your way, and then tries to pull you back in.

Most consumers are not aware that dealerships are not allowed to unwind the deal if it fails to get a bank to purchase the finance agreement.  The consumer returns the vehicle to the dealerships where the dealership generally tries to renegotiate a new finance agreement.  The new agreement will adjust the price of the vehicle in order to make it more enticing for the bank to purchase.  We have seen cases where the dealership charged the client $5,000.00 more in the second finance agreement.  This is a violation of the Pennsylvania’s Unfair Trade Practices and Consumer Protection Law.  Under that law, you may receive up to three (3) times your damages and the court may order the other side to pay your attorney fees.  Give us a call today so we can evaluate your case.

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