SC Lawyer, May 2006, #5. The Yo-Yo Sale.

AuthorBy Philip S. Porter

South Carolina Lawyer


SC Lawyer, May 2006, #5.

The Yo-Yo Sale

South Carolina Lawyer May 2006 The Yo-Yo Sale By Philip S. Porter The scenario

This client's story is that he just does not know what happened. He went to the dealership, kicked the tires, fell in love with the car, filled out the application and signed the contract, and the salesman gave him the keys and told him to enjoy his new car. He says he has been riding around the neighborhood to show it off and his wife was enjoying the new car smell.

Suddenly and inexplicably, he says, things started going wrong. His wife called him to tell him he had an urgent message from the dealership. He called, and the salesman told him the financing was not approved, and that he had to come up with another $2,000 down payment. He tried to argue that everybody signed on the dotted line and it was a deal. The salesman told him no, he had signed a contingency clause. After more arguing, the client had finally said to forget it and just give him back his trade in. The salesman told him it had been sold and suggested he'd better bring the $2,000, because if he brought bring the car back, it would go down on his credit as a repossession. He also said that if he tried to keep the car, the police would arrest him as a thief. "What can be done?" he asks you.


The yo-yo deal is so named because the dealership in a yo-yo deal rolls out the deal only to pull it back. It is also know as "spot delivery" in that the buyer takes delivery of the car on the spot, subject to some contingency. It probably originated from practices of dealerships 10 or 15 years ago when automation was not as advanced as it now is. Dealers would hold "Midnight Madness" sales or other after-hours sales, and in those days, it was impossible to assess the buyer's creditworthiness with certainty until the credit reporting agencies could be consulted during their business hours. The dealer, not wishing to lose the benefit of the sale, might in some cases structure the deal as contingent on the credit information confirming the buyer's eligibility. The buyer, ostensibly knowing his eligibility, would agree that the deal was contingent on this credit confirmation.

There may still be situations in which structuring a sale as contingent is in good faith, is well disclosed and meets the needs of the buyer and the dealer. Unfortunately, less scrupulous dealers have also made variations on the yo-yo deal to maximize their leverage, to create the appearance to the buyer that he is bound while allowing the dealer to claim some precondition failed, requiring the buyer to return the car or increase either the rate or down payment. They are often the product of misrepresentations or bait and switch tactics.

Many lawyers hesitate to represent such clients. After the initial reaction that the dealer's behavior just does not sound right, lawyers often learn that such buyers are seldom in a position to pay retainers, and the yo-yo deal is a complicated legal mess better left to attorneys that specialize.

A yo-yo deal may or may not be a promising case for a buyer. Each case will rest on its own facts but will usually be simplified by basic issues of contract. The common law and statutory law of South Carolina and the United States provide remedies that are helpful in some cases, particularly the UCC; Truth in Lending; Equal Credit Opportunity; the Law of Conversion; the S.C. Consumer Protection Code; and the S.C. Motor Vehicle Manufacturers, Distributors and Dealers Act. In addition, the Supreme Court and the Court of Appeals have recently decided cases that recognize the yo-yo deal as an unfair and deceptive practice under certain circumstances but provide no cause of action at all where the contingent terms are found to be adequately disclosed.

Threshold questions

The first job for attorneys handling yo-yo sales cases is to carefully review all documentation that was generated from the transaction. This will include at least the retail installment contract, truth in lending disclosure, security agreement, bill of sale, affidavit of sale and odometer statement, Form...

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