In February of 2010, Undersecretary of Defense Clifford Stanley reported to the US Treasury Department that nearly three out of four military financial counselors had provided advice to service members on issues related to abusive auto financing. Pentagon officials are concerned that service members’ worries about finances, which frequently include auto loans, are having a negative impact on military readiness. They also see patterns of unfair business practices that frequently target military personnel.
In one common scam, called the Yo-Yo, unscrupulous car dealers use trickery to try to squeeze more money out of car buyers. After the buyer signs a sales contract that includes the terms of their loan, they drive their newly purchased vehicle off of the sales lot. But a few days or weeks later, the car salesman calls the buyer back to the lot and claims that the loan financing has fallen through.
The salesman says the buyer will need to pay more cash in order to keep the car or renegotiate the loan with a less favorable interest rate. If they refuse, the buyer may find that their new car has been blocked in on the sales lot so it can’t be moved. The buyer may be told that their trade in vehicle has already been sold. Some dealers may also try to refuse to return the buyer’s down payment. However, the buyer has a legal right to request that the original deal be “unwound” if the financing falls through, and that all of their money be refunded.
Another tactic involves loading up the loan financing contract with expensive options. These include theft deterrent systems, vehicle service contracts, extended warranties, extra insurance to cover loan payments if the vehicle is involved in an accident, and even credit life insurance and disability insurance policies for the buyer. These unnecessary items can cost buyers a lot of money over the life of their loan.
That vehicle looks great on the car dealer’s lot and you know you’d look great behind the wheel. But when you go car shopping, don’t be in a hurry. Make sure you’re getting a fair deal, especially if you’re buying a used vehicle. Research the car’s history and get a mechanic to look it over before you sign anything. And remember, a used car is usually sold “as is.” If it breaks down after you drive it off of the lot the dealer isn’t responsible for fixing it.
“It’s a fact that military personnel love their cars. Sadly, many of them end up paying far more for them than they should.” Holly Petraeus, wife of General David Petreaus and Director of the Council of Better Business Bureaus’ Military Line, which provides consumer education for service members