How to make the dealership bend over backwards?

[Matador]

How about you take what you have saved up for the FR-S, pay off the Yaris, then when the time comes, sell the Yaris to make a down payment on the FR-S?

[djdnz]

Originally Posted by MatadorRacing_F1

How about you take what you have saved up for the FR-S, pay off the Yaris, then when the time comes, sell the Yaris to make a down payment on the FR-S?

Agreed.

[Kiteless]

I want to thank you all again for all the advice. I was mainly looking for advice as to how to try and get the dealership to offer me top dollar for my Yaris when the time comes to get the FR-S. I was very apprehensive about talking about my finances in such a public way but I appreciate all the financial advice anyway.

Right now I think my plan is going to be to wait until I can at least break even on the sale of the Yaris, private party, and take what ever money I have saved up at that time and use it as a big down for the FR-S. Of course I realize that the longer I have my Yaris the less it will be worth. But my credit is a lot better than it used to be, so hopefully with a reasonable sized down payment of 6K to 10K I should be able to get myself in a good loan and get the FR-S paid off quickly.

A friend of mine has a 2001 Celica GT, the lower end model. He loved that little car. He has had it for ever and it has been really solid, even though he drives it a little hard, but not FLOGGING it. I have been jealous that he has had such a neat little sporty car all these years. I am hoping the FR-S will be that 10 year sporty car for me. Something fun but still reasonably economical.

Thanks again everybody!

- Jason

[RRnold]

Word to the wise, your credit score would increase tremendously if you paid it off. That would reduce your debt/income ratio but it will also reflect your creditworthiness. That is what matters the most; no late payments and the ability to pay off a loan or open ended credit.

[Giccin]

Originally Posted by RRnold

Word to the wise, your credit score would increase tremendously if you paid it off. That would reduce your debt/income ratio but it will also reflect your creditworthiness. That is what matters the most; no late payments and the ability to pay off a loan or open ended credit.

+1

[VenomRush]

wrong thread... can i be a mod now? lol

edit: wrong sections i should say

[Matador]

New section needed? "How to afford a brand new FR-S" ?

[tranzformer]

Originally Posted by MatadorRacing_F1

New section needed? "How to afford a brand new FR-S" ?

No shit.

[yarik83]

Originally Posted by keiri

Holy h*ll Yuri! How've you been man?



Good to see you alive Captain Pessimist and what a post. You mind giving a mathematical example of your last point though - I think I understand it but numbers would really help further distill the idea.

Absolutely.

Lets backtrack to 2007. Lets say for whatever reason you were able to afford a then new wrx sti. Subaru is known to give certain incentives and after all said and done lets say you could get car out the door with Dealer's financing for $550/mo. That number assumes 0%APR. That number also assumes that you or co-signer had perfect credit history.
Fast forward to 2012. Assuming you were making payments on the car you would expect to have paid off about $26,400. If you were to open a KBB you would see that hypothetically your car's value was $25,000 private, $20,000 trade in with an asterisk. The caveat is that no car loan is simple for a private party. Most private lenders (ie Bank of America) will give you a loan with something like 7% APR with an excellent credit history (which most people do not have) so it will be like buying a car with a credit card using rates of 11-18% but through an auto loan. Dealers on the other hand talk people into 72 month loans that reduce monthly payments but increase overall cost of the vehicle by about 20%.

To a dealer trades are not profitable because if you walked in with an STI and $6600 left to pay and asked for a $20,000 trade in they would look at you funny and tell you to keep dreaming. Mathematically speaking dealers pay lets say $20,000 on a $25,000 FRS. That means they are banking on making car viable to sell in the first place. They need to collect overhead to help pay salaries, administrative fees, electric bills etc. So if you were to trade a 4 year old STI with a trade in value of $20,000+$6600 still owed for a $25,000 FRS (assuming you can get that price out the door with 0%APR)... they would be paying $20,000 to get the FRS then trading it for a car of equal value that they still have to sell. On top of it they still need to charge you $5000 more. Only way that could work is if you the buyer are held responsible for remainder of your STI's loan (thus making 2 car payments for a whole year while driving 1 car) and they agree to trade in a "favorable" car. Favorable car is one that is easy to re-sell. Something that people want and they could make a profit on. 2007 mustang would be a better candidate than a 2007 daewoo whatchamacallit.

One of the reasons for this outcome is due to the fact that you are technically upside down on a car loan. Cars depreciate and not appreciate. A 2007 STI purchased for $33,000 new will not be able to resell for $33,000 in 2012 because 2012 STI's are going for that price. You can, however recoup some money on your paid off vehicle by selling it. If you could find a private party willing to buy your 4 year old STI you could potentially recoup 50-60% of your investment assuming you could find a buyer.

So what is a good way to walk into a dealership and trade in your car? The car needs to be virtually paid off or paid off. The car needs to be resellable and in excellent condition and has to be about 10 years old. Dealers love those because they can give you $4,000 trade in and post it for $6995 right after you walk out the door. The golden number is always below $5000 trade in but it will only work if car you are buying is multiple times that of your trade in. 1994 VW beetle for example would fetch about (dont quote me on this) $3000 trade in, If you walked into toyota dealership and asked for a $25,000 FRS they would likely agree to give you that amount in trade but with a painful car loan that will make you repay $3000 and then some through interest so your FRS would end up costing you like 30 grand. On the other hand if you wanted to trade in a used beetle for a used corolla they would likely not allow you to trade because there would be little wiggle room for them to make a profit of.

My example:
I have 2008 Toyota Tacoma 4x4 6cyl double cab with a camper shell. I paid $22,400 for the truck used when I bought it in 2010. Camper shell was $1600. If I took my car to a dealer right now and wanted to trade it in for a 2012 Tacoma they would likely make me a super low ball offer on the truck like $14,000 trade in which would imply that I would still be upside down on my loan.

Since cars ALWAYS depreciate your only option of not being upside down is to pay it off. Cars lose 30% of their value in first year and then slowly wither away. However if you manage to pay that car off (in this case its Yaris) then you could potentially recoup some of it.

In my case I have my eyes on an Evo X but with economy the way it is I have to re-examine my priorities and being a fresh home buyer does not help either since my finances constantly go towards buying something for the house. But if I was to buy Evo or Supra or FRS or BRZ or whatever... if would definitely secure a car loan first (after running appropriate credit checks). If my credit score is 90000 bazillion then I can walk into dealership and likely get 0% APR but if its not I would have to figure out which option is better, be it through dealer, bank, credit lender, home equity, family loan or otherwise.

Do keep in mind that just because KBB says something does not mean dealer has to honor it. You are not walking into best buy purchasing a $1000 plasma tv which costs $1000 in Kansas, Alaska, Florida, Louisiana. You are walking into a building full of hyenas salivating at opportunity to make a profit from earning commissions, predatory lending practices or otherwise. Having your ducks in the row before you step your foot there will save you in the long run.

And whatever you do NEVER EVER EVER EVER borrow against your car unless its completely paid off because you will be upside down on an upside down loan which is twice as hard to repay.

[keiri]

And that's what I thought you were getting at. Thanks for breaking it down even further and making it real easy to see the twists.

I'm glad when I buy this car I'll be doing it without a trade-in or being under another vehicle.

[yarik83]

Here is another look at it:

Yaris fetches $3,000 trade in for $25,000 and $3,000 left to pay for Yaris loan.

With perfect credit history and a trade in.
You take FRS for $22,000 out the door with $3,000 left to pay on your upside down Yaris loan resulting in 2 car payments.

With iffy credit history and a trade in.

Dealer 1 offers to buy out your car loan for Yaris and gives you $3,000 in trade allowance. Unfortunately your loan will be given for 72 month term resulting in overpayment for FRS in amount of $5,000 which is more than what they gave you so they win this round.

Dealer 2 gives you the trade allowance but with iffy credit history you are given a high risk loan giving you a credit card like interest rate. End result is that you owe $3,000 with iffy APR on Yaris loan and $22,000 FRS loan also with an iffy APR.

Dealer 3 offers to buy your your Yaris for $3500 contingent on you buying FRS at their rate of chosing and their terms of engagement. End result is that you will likely pay off Yaris loan but will have $25,000 FRS loan with questionable interest rate loan.

I do have to put a disclaimer here: I am not a professional loan advisor so you should take great care in your research.

There are other considerations out there such as dealer cash back, loyalty programs etc.

On a 0%Apr you will likely pay car sale price after 5 years
On a 7% Apr you will likely pay car sale price and 20% on top of it through interest

In other words a $25,000 FRS will cost you about $31,000 after 5 years with 5-7% loan.

[VenomRush]

Originally Posted by MatadorRacing_F1

New section needed? "How to afford a brand new FR-S" ?

more like, other vehicles or off topic

[ruskymx]

I've been lurking here for a while and came across this thread and felt compelled to register and reply.

A quick background on me: I've work for Toyota for 10 years come March 2012 and have been a salesperson the entire time at the same dealership. I'm not one of those guys that jump from store to store every 6 months, which there is a lot of in the car business. My dealership has had Scion since October of 2005.

Since the FR-S is a Scion, each dealership has to abide by the Pure Price philosophy, which means that they have to charge the posted price that they have in their showroom and on their website. In PA where I am from, this price is MSRP and only increases if we accessorize a car and those accessories are at the posted prices as well. Example: You go to Scion.com and build a 2012 tC and add a spoiler to it and it says it costs $444. Guess what, when you come into the dealership, it will cost you $444 installed, unless otherwise posted by the dealership you use.

Pure Pricing is also applied to interest rates. Currently, for Zone 1 + (720+ on Experian, Toyota Financial uses that bureau for it scoring), the interest rate for up to 60 months is 3.39%. Far from the 7% for excellent credit mentioned in previous posts. What you will NOT see on the FR-S is 0% or any Scion for that matter advertised directly from Toyota.

Now for your trade question. Using your car as collateral wasn't a very good idea, but when times get tough, you have to do what you have to do. I cannot speak for all dealerships because some may not deal with selling used cars, but I know in my area, we wouldn't be able to survive by selling just new cars, especially with the inventory situation we've had with the earthquake/tsunami in Japan earlier this year. We sold more used cars than new for a few months during the summer.

Anyway, your Yaris is worth the same amount, whether you have the title in hand with no liens, it's leased, or if there is a lien on it. It doesn't matter. What else doesn't matter is if you owe $500 on it or $10,000. If anything, a used car manager may value it a little higher just to try and get a new car deal, and get you out of your current car. I'll quote my used car manager here, "This is a shot, this is all of it." The nationwide average of negative equity is $4-5k, so don't feel bad. You are not alone. The worst I saw was $42,000 on a Durango and we SOLD him 2 trucks a few months apart, first a Tundra & then a 4Runner. Granted, this was before the financial crap hit the fan in September of 2008.

Look at it this way, if you keep making your regular payment on your Yaris, your payoff will keep going down and just save money for a down payment and then when it comes time to buy the FR-S, you'll have negative equity, but you'll also have a large DP. How far are you into your loan? reason I ask is because the majority of the interest is paid at the beginning of the loan, so if you are half way though your loan. Example: $12,000 financed for 60 months at 10% (high rate). Payment is $254.96 and your first payment, $100 goes towards interest. Payment #30, $57.83 goes towards interest. Payment #45, $31.70 goes towards interest. Last payment, $2.11 goes towards interest.

Using that info, you will pay some more money in interest if you just make minimum payments on your car now. If you are half way though your loan and the car comes out in 8 months, worst case is you pay $400 more in interest, probably a little less, but it all depends how far into the loan you are. If you do pay extra on your Yaris loan, your payoff will be lower, but then your DP will be too, and unless you pay it off entirely, you will not save money on interest until you do so. If you double up your payments, and have the extra applied to principle (IMPORTANT!!!!!!!), it doesn't change the amortization of the loan, it will just knock off payment off the end of the loan. It will be paid off early, thus saving you money. Example, if you pay $5k towards your Yaris, your PO will be $5k less, but if you are on payment #30 in example above, the interest will still be $57.83.

If you want my professional opinion, make your regular payment and save what you can for a down payment. When it gets closer to the FR-S coming out, list you car for sale privately. With gas prices the way they are, you should be able to sell the car relatively easy for more than trade value. I don't know if it's different from county to county in CA, but a friend of mine bought a car in Sacramento and CA doesn't give a tax credit on trades. Also, it wouldn't hurt to get your car appraised at a few Scion dealers to see what they would give you for a trade. It shouldn't vary by more than $500 to maybe $1000 at most. Go to a CarMax as well because they will buy your car from you without trading it in. Keep in mind though, that you will be responsible and REQUIRED to pay the difference in value to your payoff. If you do trade in your car with negative equity, the large down payment will look good to the bank and increase your chances of getting approved at a good rate. If you had no money down, rolling over $5000 into a new loan isn't as easy as it used to be especially if your credit score isn't the greatest.

On a side note, a friend of mine sent me these:

Supposedly from a Japanese brochure.





I think I covered everything that I wanted to but maybe not. :happy0180:

Ruskymx

[quik1987]

Ew, what is that trim on the door? Tell me it's removeable.