Many car buyers — 43%, in fact — finance their vehicles. While many people take out loans to pay for their vehicles up-front, and pay back the bank, many others opt for financing straight through the dealership.
By advertising low financing costs and reduced prices, dealers are able to offer appealing financing options. Some dealers will allow the buyer to take the vehicle home before completing the financing option, then charge them more money to keep the ride after telling them that their credit is too poor.
This practice known as a “yo-yo” tactic, and is illegal. This is exactly how Sage Auto Group managed to land in hot water with the U.S. Federal Trade Commission, after they’d unfairly targeted individuals with poor credit, as well as non-English speaking customers.
The FTC has filed a lawsuit against Sage Auto Group, citing yo-yo tactics as well as other “deceptive and unfair sales and finance practices.” The lawsuit includes Universal City Nissan, Kia of Downtown Los Angeles, Mercedes-Benz of Valencia, Sage Hyundai, Sage Covina Chevrolet, and West Covina Toyota. Only one Sage dealership — Sage Lotus in West Covina — was not named in the lawsuit.
Sage Auto has also been accused by the FTC of posting phony online reviews, written by employees, not customers, as well as charging customers for warranties and add-ons without their consent, and not disclosing credit or lease requirements.
Owner of the auto group, Michael Sage, says that he is aware of the FTC requirements, and he holds his dealerships to high standards as well.
“We look forward to vigorously defending ourselves. We will fight this,” said Sage. “When you’re on top of the pyramid, you’re going to get attacked by everybody. We’re number one. We keep kicking it.”
In 2015, the FTC expanded its definition of deceptive practice beyond advertising and into loan application fraud and adding charges to the vehicle’s lease or bill of sale without the customer’s consent.
Sage Auto Group, which was founded in 1969, has had no prior accusations by the FTC. This case marks the first time that yo-yo tactics have been addressed in a lawsuit.