Consumer Protection

Yo-Yo Sales


Once you have settled on the car you want to buy, it is only natural that you will want to take possession of the car as soon as possible. If you have already obtained approved financing from your bank or credit union, you will be in a position to quickly complete the transaction and take your new car home. However, if you are applying for financing through the dealer, you should be aware that the financing portion of the transaction will probably not be approved by the finance company on the same day you apply. In fact, it may take a few days to receive financing approval.

You may reach an agreement with the dealer to drive your new car off the lot the same day you selected it, even if the financing terms are not final. This may create a problem for some consumers. If the financing rate or other major loan terms you agreed to do not get approved, the dealer may offer different financing terms (such as a higher interest rate or larger down payment) in order to complete the purchase. This is called a “yo-yo” sale. Different financing terms could make the purchase more expensive for you. But, if you have already taken the car and left your trade-in at the dealer, what choice do you have?

Arkansas law provides other options to consumers who do not want to complete the purchase with less favorable financing terms. Arkansas consumers have the right to cancel a vehicle purchase if the seller changes the terms of the sale. The law applies to both new and used car dealers and is designed to make sure the financing terms of a vehicle sale do not change after the buyer leaves the lot with their new vehicle.

If your car dealer suggests that you take possession of your new car before the financing has been approved, the dealer is required to notify you that the deal is not final and that you have the right to cancel the sale without penalty if the terms change. A document must be signed by both the seller and the buyer containing all the anticipated terms of the agreement. While the terms are pending, the dealer cannot deposit your down payment, and cannot resell your trade-in vehicle exchanged in the deal. If any of the financing terms change, you have the right to cancel the deal with no charge or penalty. If you decide to cancel, you must return the car to the dealer and the dealer must give your trade-in back and any down payment you have made. You cannot be charged for the miles you put on the car while it was in your possession.

To avoid a potential yo-yo sale, the Consumer Protection Division recommends that buyers not take a vehicle off the lot until the financing is final and all paperwork is signed by both parties. If you are a victim of a yo-yo sale, and the dealer does not allow you to cancel the vehicle purchase and return your trade-in and any down payment you made, you may file a complaint with our office.

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