Drive off without financing — and you’ll pay dearly – Chicago Sun-Times

Updated: June 19, 2012 5:09PM

Here at Fixer HQ, we’ve heard lots of unfortunate stories about consumers who drive off a car lot with some new wheels and a salesman’s promise that they’ll get financing later.

Earlier this spring, we fixed a problem involving a Chicago woman whose trade-in was sold to someone else by the time she learned that her financing had fallen through.

It turns out there’s a name for this all-too-common occurrence: “the yo-yo sale.”

That’s what The Fixer heard last week at a consumer fraud conference here in Chicago hosted by the Federal Trade Commission, the Illinois attorney general’s office and the Legal Assistance Foundation of Metropolitan Chicago.

Not every dealership operates like this, and the key for consumers is to stick with the good guys.

But those who use this trick do it like this, according to Ira Rheingold, executive director of the National Association of Consumer Advocates: First, they may advertise something like “Bad credit is no problem!” The buyer is excited to be getting a new car, so he eagerly trades in his old vehicle, signs a contract, and drives off.

Weeks later, however, he gets bad news. The financing fell through.

The consumer is told to bring the car back and is promised that a salesman will help him get a different car he can afford.

At this point, Rheingold says, the consumer has already sunk money into the deal and his trade-in may have been sold. He feels at the mercy of the dealer, who now steers him into a crummier car at a not-so-great interest rate.

Thus, the “yo-yo.”

Some dealers even try to tack on charges for the consumer’s use of the car before the loan fell through, Rheingold told The Fixer.

William Brauch, director of the Iowa attorney general’s consumer protection division, said he’s seen dealers falsify buyers’ income, underreport their debt and inflate trade-ins’ values to get people into car loans — often at interest rates they can’t afford. Some advertise that they’ll pay off the buyer’s underwater trade-in loan, when they’re simply rolling the old debt into the new loan.

“That kind of stuff goes on every day,” Brauch said.

Rheingold’s advice? Check with smaller community banks to see what sort of loan you can get. And check out car-buying tips at FTC.gov before you go on a test drive.

Costly Lesson: A consumer’s tale of woe

Steven of Aurora has been a big fan of Xbox 360 since 2005. So when he got the new, limited edition Kinect Star Wars Xbox 360, he was psyched to start playing online.

He transferred all the content from his old hard drive to the new one. His online account was fully paid through Dec. 11, 2012, via PayPal.

But while Steven’s Gamertag profile transferred over, his email address and password did not. Without those, Steven could not access the gaming services he’d paid for.

Worse, the email address used to set up the account seven years ago was defunct. And Steven couldn’t remember his answer to the security question or provide the last four digits of his old credit card.

“I entered that information years ago,” Steven wrote The Fixer. “The credit card on file is for a bank I have not used in years.”

This tale has a happy ending, though. Steven tried every conceivable email address and password combination until he finally guessed the right one. “It only took about 24 hours,” he told The Fixer.

The lesson for the rest of us: Retain your passwords in a safe place. And choose passwords that you — but no one else — can easily remember. Try using the first letter of each word of your favorite phrase.

Never use an obvious password such as your birthday or the name of your child. And pick a different password for each account you need to access.

What is a Costly Lesson? It’s an UNFIXABLE problem that cost someone a lot of money but holds a valuable lesson for the rest of us. If you’ve got something to warn the rest of us about, e-mail it to szimmermann@suntimes.com with Costly Lessons in the subject line. And don’t worry — with Costly Lessons, we leave out last names to prevent further embarrassment.