I imagine you drove off the lot in your newly financed used car, stoked about your new ride and relieved you scored a decent rate — 6% interest, manageable monthly payments, and the peace of mind you didn’t get fleeced.
Your dealer’s sour update probably feels like a punch in the gut. And it should.
This kind of last-minute rate increase is a big red flag, but it’s not always an outright scam. Sometimes lenders genuinely change the terms after taking a closer look at your credit or your co-signer’s history. But shady dealers know that, too, and they’ll use it as cover to pad their profit.
Fighting for every penny in a car purchase has rarely been so important. Tariffs on new imported cars and parts are increasing the cost of new vehicles. As new cars become less affordable, more buyers shift to the used market, driving up demand and prices for used vehicles — nevermind the impacts of tariffs on the parts used to repair used cars.
You may be considered fortunate to get an 8% rate, even if it’s higher than what you were initially offered. Credit agency Experian says the average rate in the U.S. is nearing 12% — and that jumps wildly for someone with mediocre credit.
Banks really do sometimes decline a deal or increase the rate after initial approval. Especially in used car sales, dealers often let buyers take the car before final financing is fully locked down. That’s called spot delivery or conditional delivery.
If your co-signer’s credit is worse than they thought, or if your own credit report has issues that didn’t show up immediately, the bank might truly reject the original rate.
But it’s also true that this is a well-known dealer tactic, sometimes called “yo-yo” financing, a problem so bad the FTC has a video on it to warn buyers. The dealer lets you take the car home at a “too good to be true” rate knowing they’ll call you back later with the bad news. By then, they’re betting you’ll agree to almost anything to keep it.
Dealers might also claim the bank rejected the deal when in reality they’re just steering you into a loan with a higher interest rate that pays them more in commissions or markup.
