Local car buyers' deals put in reverse in 'yo-yo sales'

Lasone Cannon found a 2009 Nissan Sentra that she liked last summer at Victory Nissan in Chesapeake.

The dealership offered her financing, took her car as a trade-in and had her sign the papers. Then, almost two months later, she said, Victory called her back to say the terms of the sale had changed.

Cannon recently sued Victory, accusing the dealership of fraud for telling her the deal was done when it wasn't.

Cannon was instructed to return the new car and told that her trade-in, which she said she had left in good condition, was "inoperable" and required about $1,000 in repairs. She declined to give the new car back, so Victory repossessed it from the parking lot at her Newport News apartment building.

"They were not honest," said Cannon, a single mother who was six months pregnant at the time. She took unpaid leave from her job as a security officer. "I didn't have a way to get to work."

Jonathan Davenport, general manager of Victory Nissan, did not respond to questions about Cannon's suit.

Cannon, 25, and two other Hampton Roads car buyers have sued four local auto dealerships in U.S. District Court in Norfolk for what consumer attorneys call a "yo-yo sale." The practice isn't new or unusual, they say.

In these cases, according to the lawsuits, a dealership tells a consumer that financing has been approved and allows him or her to take the car home with temporary tags. The consumer signs a contract that includes the loan terms and lists the dealership fees, the court documents say.

The dealership usually tries to sell the loan to an outside financing company, but if it can't find terms it accepts, it tries to undo the contract with the customer, according to the four lawsuits filed in late March and April by Jennifer Sherwood, a Newport News attorney.

This is legal in Virginia, as long as dealerships disclose it.

The contracts in these cases did include the disclosure, Sherwood said.

The lawsuits accuse Victory Nissan, Hall Nissan, Priority Toyota and Casey Chevrolet of deceiving the customers by telling them "that financing was approved when it had not been" and by charging them to process title transfers and other documents without doing so.

Each lawsuit seeks unspecified damages, in addition to penalties for any violations of law.

Officials of Hall Automotive and Casey Auto Group declined to comment on the suits against their dealerships.

Priority Toyota denies that it did anything wrong when it sold a 2003 Ford Expedition to a Hampton couple, wrote Stacy Cummings, Priority Auto Group's vice president and chief financial officer, in an e-mailed response to questions about the suit filed by Phillip and Micagee Brown.

"The Browns took delivery of the vehicle with knowledge that completion of the sale depended on a finance company approving their credit," he wrote.

Under Virginia law, dealerships can repossess cars as long as the contract says the deal is conditional upon the approval of financing.

The problem, said Sherwood and other attorneys who handle such cases, is that consumers believe financing has been approved because that's what the dealerships say.

"The dealers all tell the consumer it's done," said Len Bennett, another Newport News attorney who has handled several yo-yo sale cases against local auto dealers. "They don't say, 'Cross your fingers. We'll know on Tuesday.' "

Sherwood's lawsuits describe some of the dealerships' salesmen shaking the car buyers' hands and congratulating them on their purchases. "They took pictures, and the sales manager said he was going to put it in his scrapbook," Cannon recalled Wednesday in an interview.

Starting in July, state law will require simpler language in auto sales contracts that explains buyers' rights to receive their trade-in and down payment back if the dealer cancels the contract.

Yo-yo sales grew in frequency as the Internet became a source of lending information for consumers and auto dealers alike, Bennett said. Dealers today can access websites that allow them to run a consumer's credit in an instant and get a list of potential lenders and their terms for buying the loan. But the outside lender has no obligation to take that loan on those terms if it deems the final deal too risky, he said.

That's why yo-yo sales are more common for consumers with poor credit, because dealerships usually have no trouble finding acceptable terms to sell loans of customers with good credit, Bennett said.

In Cannon's case, Victory Nissan never agreed to the terms from the finance company that it said would take her loan, her suit claims. She couldn't afford to repair her trade-in and turned it over to the lender. That damaged her credit rating, so she was unable to buy another car, Sherwood said.

Cannon said she wishes the dealership had explained that the sale wasn't final.

"If it wasn't a good deal or they weren't able to finance me, they should have let me know," she said.

Carolyn Shapiro, (757) 446-2270, carolyn.shapiro@pilotonline.com