Call Kurtis: When Car Sales Go Bad: Yo-Yo Financing

You buy a car, drive off the lot and think it's a done deal. If your financing falls through, California law allows the dealership to ask you to fork over the entire price of the car.

One first-time car buyer called Kurtis when the dealership called more than a month later, saying they couldn't find him a loan.

"It's pretty good on gas," said Derek Nasca.

The 21-year-old is a proud first-time car buyer. Well, he's actually a repeat first-time car buyer. A few months ago he got a 2010 Chevy Malibu.

"We thought he'd bought the car," said Pat Nasca, Derek's grandmother.

She helped him negotiate the deal. But more than a month after driving the car off the lot, the dealership had bad news.

"He called and said, 'Oh, we're having problems trying to find you someone to hold the loan,'" said Derek.

Derek was faced with three options: come up with a bigger down payment, find a co-signer or bring the car back.

"There was nothing said to us at all about this was a temporary or that this might not go through," said Pat.

The practice is called spot delivery. You take the car home right away, even though the dealer hasn't finalized your loan.

It can lead to a predatory practice called yo-yo financing, in which the dealership leads you to believe the deal is done. But they reel you back in later, saying financing fell through, asking you to sign a more expensive loan.

"It's common enough in the United States that the Federal Trade Commission has discussed it at a recent conference," said Carroll Lachnit, features editor for Edmunds.com.

Lachnit says yo-yo financing is often aimed at people with little or tarnished credit. A number of consumer groups are asking the FTC to ban the practice. Lachnit says there are ways to prevent it from happening to you.

"You can wait. Make your down payment, let the paperwork go through, call back on Monday, see if the loan went through. Don't take possession of the car until you know the financing is in place," said Lachnit.

Or you can get preapproved from your bank ahead of buying a car.

Derek refused to put more money down or get a co-signer. So he returned his Malibu and got a Chrysler 300 from another dealership.

"Happy ending and it's funny 'cause the payments are less than what they were on the other car," said Derek.

If you do fall into a yo-yo finance deal, ask the dealership for proof from the lender that your loan was denied. If the dealer turns that over, you have to return the car or sign a new deal.

If you have to give the car back, demand your down payment back, but the dealer can charge you for a restocking fee or for excessive wear.