Quick answer
Yo-yo financing (also called spot delivery) is when a dealer lets you drive off before your financing is final, then calls you back days later saying the deal fell through and pressures you into a worse contract. You don't have to sign a new contract. If the dealer cancels the deal, you're generally entitled to get your down payment and trade-in back when you return the car.
Key takeaways
- You are not required to sign a new contract with a higher rate or bigger down payment.
- Most dealer contracts have a short window and specific steps the dealer must follow to cancel.
- If the deal is canceled, the dealer should return your down payment and trade-in.
- Under the CARS Act (effective October 1, 2026), dealers can't misrepresent whether they'll keep your down payment or trade-in if a deal isn't finalized.
- Threats, kept down payments, or a sold trade-in are red flags worth getting reviewed.
How the yo-yo works
You sign the paperwork, hand over a down payment and maybe your trade-in, and drive home. A few days later the dealer calls: the lender didn't approve the loan, so you need to come back and sign a new contract, usually with a higher interest rate, a bigger down payment, or an expensive add-on.
Sometimes the financing really didn't go through. Sometimes the first deal was approved and the call is a way to get better terms for the dealer. Either way, you have rights.
Read your contract's cancellation clause
Dealer-arranged car contracts in California commonly include a clause, often titled "Seller's Right to Cancel," that lets the dealer cancel if it can't sell your contract to a lender within a set number of days. That clause also spells out what each side must do. Typically the dealer must give notice within the deadline, you return the car, and the dealer returns everything you gave it, including your down payment and trade-in.
If the deadline in your contract has passed, or the dealer didn't follow the clause, the original contract may still stand. The Consumer Financial Protection Bureau also notes that if your contract doesn't clearly say the deal isn't final, you may have the right to keep the car on the original terms.
What the dealer can't do
- Force you to sign a new contract. You can say no and unwind the deal instead.
- Keep your down payment or refuse to return your trade-in if the deal is canceled.
- Mislead you about whether it will keep your down payment or trade-in if the deal isn't finalized (prohibited by the CARS Act starting October 1, 2026).
- Misrepresent your financing approval or rights (prohibited by the Consumers Legal Remedies Act).
What to do next
- Don't sign anything new on the spot. Ask for the cancellation notice in writing.
- Find your contract and look for the seller's right to cancel section and its deadline.
- Write down who called, when, and what they said.
- If you return the car, get a signed receipt and confirm in writing when your down payment and trade-in will be returned.
- Request a free case review if the dealer kept money, sold your trade-in, or threatened you.
Frequently asked questions
Sources
- Consumer Financial Protection Bureau: Can the dealer increase the interest rate after I drive the vehicle home?
- SB 766, California Combating Auto Retail Scams (CARS) Act, Civil Code § 1784.20 and following
- California Civil Code § 1770 (Consumers Legal Remedies Act: prohibited practices)
This website provides general information, not legal advice. Laws change and every situation is different. Talk to a licensed attorney in your state about your specific facts.
More on this topic: California car buyer rights & dealer fraud overview