The “yo-yo” or “spot-delivery” sale typically proceeds in the following way:
The consumer negotiates and believes a vehicle’s installment contract or sale is final, and the dealer gives the consumer possession of the car “on the spot.” The dealer leads a consumer to believe that all the conditions necessary for the proper sale of the vehicle have been met by the consumer and that the vehicle has, in fact, been sold on credit issued by the dealer.
Usually, the purchasers and dealer have executed all the necessary documents to complete the transaction, including buyer’s order, retail installment contract, Truth In Lending Disclosures, application for title, and odometer disclosures.
The dealer later tells the consumer to return the car because the financing (which the consumer understood and had been led to believe was approved) had fallen through. If the consumer does not return the vehicle or agree to rewrite the transaction on less favorable terms, the dealer repossesses the vehicle.
Often, the dealer has already sold the trade-in vehicle. This leaves the consumer in the disadvantageous position of not having any transportation unless he or she agrees to the less favorable terms. Also, the dealer will rely on the customer’s attachment to the car and the fact that he or she has already shown it off to others. These factors combine to pressure the customer into signing the less favorable deal.
The Georgia Office of Consumer Protection has published its policy on yo-yo sales in Georgia. The policy may be found here. (see page 24) The Georgia Office of Consumer Protection states:
It is unfair and deceptive for a dealership that conditions a vehicle purchase or lease on the approval of consumer credit to represent to the purchaser or lessee that they have been approved by the prospective lender to a consumer credit transaction if such approval is not final. If the sale or lease of a vehicle is conditioned on final approval of financing by a lender or lessor, the dealer must retain title and possession of any vehicle traded by a consumer as part of the transaction until financing is actually approved.
If financing cannot be secured, and the consumer chooses not to execute another finance agreement for the purchase of the vehicle, then the dealer shall immediately return to the consumer any traded vehicle and/or down payment previously tendered by the consumer as part of the transaction.
The Georgia Office of Consumer Protection takes a specific position that dehorsing is an unfair business practice.