Monday, November 19, 2012, AM | Leave Comment
Buying a car despite the shaky credit score you have? Surely, it is a big respite when you sign the final contract. You may get a call a few days later from your dealer to inform you that the financing fell through and a new agreement would have to be signed at a higher interest cost and even asking you to make a higher down payment. This puts you in a spot leaving you puzzled on what to do next.
This is a classic case of buyers falling victim to “yo-yo financing”. In such a scenario, the dealer allows a buyer with a shaky credit score to take the possession of the car before the completion of the financing formalities.
Not only is the buyer forced to higher interest cost and fees if the financing falls through, but additional demands also come as a result of such schemes.
Yo-yo financing is a part of the highly misleading term “spot-delivery” where cars are sold before actual completion of financing arrangements.
Uses and misuses of “Spotting”
Despite being promoted as a customer centric scheme, a lot of unscrupulous practices by dealers leave buyers with a bitter taste in the mouth. Customers are not only left highly vulnerable to the web of high, but also end up in a situation where they have to compromise at every step.
The primary reason for the mushrooming of yo-yo financing is because banks do not approve loan applications over a weekend. It is alluring when a dealer offers you the option to drive home a car instantly vis-à-vis the scrutiny of a bank to review your application.
Several consumer protection firms have been advocating against the unfair practices of the dealers. However, a lot of experts do feel that the percentage of such cases is few as compared to the bigger spot deliveries.
Are you being put in the spot?
It is suggested that consumers with a lower credit rating should get preapproved financing before falling into any trap. You should always double check by obtaining a confirmation copy from the financing agency. Do not sign any additional paperwork, for these may allow the dealer to make changes in the existing contract.
It is completely possible for dealers may try to seize the vehicle to make you concede to his demands.
Knowing Your Rights
Each state has different laws. But regardless of the laws, dealers can put pressure on consumers to agree to their terms using different tactics. While some may threaten to repossess cars, others intimidate you by saying that they will file a complaint with the authorities about the vehicle being stolen.
The Final Word
World over, unscrupulous financiers can turn potential shoppers into compulsive buyers. The yo-yo financing under the Spot-delivery scheme is a simple example of the vulnerability of the buyers.
It is true that a lower credit score surely makes it difficult for you to get the car which you may have be wanting to drive but an intelligent way to look for alternatives like saving some money and buying an inexpensive car through cash can save you from the troubles of dealer.
This post is authored by Franklin Dias. He is a financial analyst and suggests going for short term cash loans in times of financial crisis.