Maurie Backman

Sat, Jun 7, 2025, 4:34 AM5 min read

Financing a car at a high interest rate can be frustrating, but what's even worse is being promised a specific rate through the car dealer and then being stuck with a different one.

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It’s called yo-yo financing, a deceptive tactic used by auto dealers that allows you to drive the car off the lot before the financing is fully finalized. You are then informed that the loan fell through and that you must accept less favorable terms to complete the purchase.

You might have regrets about taking out a $15,000 car loan with a 14.89% annual percentage rate (APR). But it looks like your APR is even higher and you need to re-sign the documents?

Should you proceed, or use this opportunity to get out of the loan?

The average user car loan rate was 11.87% in Q1 2025, according to Experian. However, the average for customers with Deep subprime (credit scores 300 to 500) and Subprime (credit scores of 501 to 600) credit was 21.58% and 18.99%, respectively.

Considering you say you have bad credit, the rate you were offered at the start (14.89%) isn’t surprising. However, it doesn’t mean you made a smart financial decision with this purchase. More on that later.

Now it seems the actual rate has come through at 15%, which means the dealership may be engaging in yo-yo financing. Or, it could just be a case of poor communication.

Usually, with yo-yo financing, there's a substantial difference between the original APR offered and the one a dealer tries to stick you with. Here, the difference here isn't so tremendous. Also, dealers commonly use yo-yo financing to lure buyers with super low rates. A 14.89% APR isn't that competitive.

Review the paperwork you signed. It could be that it says the sale is not final and the dealer can change the terms. In this case, you would have to resign the documents with the new APR to keep the car.

You probably also have the right to give back the car instead of paying a 15% APR on your loan.

This could actually be a great opportunity to get out of a bad deal that could hurt you financially. It may be time to give back the car and consider other options, like saving up for a car you can pay in cash for or saving to pay a larger down payment. You don’t want to be stuck making payments for a car that you can’t afford, and a 14.89% rate is quite high.