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Discussion Starter #1
How can it be to Toyota's advantage having me finance a car even partially or even for just a couple of months enough to justify them giving a big discount if I finance as opposed to paying cash?

And it isn't just Toyota. I walked into Walmart needing a new phone because I had run out of memory on a 4 year old one (too many apps). I saw a nice one in my price range (cheap) and they only offered it with monthly payments at zero interest. The sticker listed the total price when financed. But you couldn't buy it with a single up front payment.

In both cases, I was perfectly willing to pay cash which would give them the money from day one ... while granted interest rates aren't much now days.

But why the 'we want you to finance' scheme?
 

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TFS rates are typically higher than what you can find through CU. A lot of people don’t bother refinancing once they get the initial TFS loan so they are betting on interest payments + any fees will pay for the rebate they are offering. Plus it also gets people in the door thinking there’s a $1250 rebate when some don’t qualify based on credit score.
 

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When you sign up to get the rebate dealer tells you "... you must make 6 months of payments before refinancing or paying off or they will come knocking on the door to get that rebate back..." bull$hit
 

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When you sign up to get the rebate dealer tells you "... you must make 6 months of payments before refinancing or paying off or they will come knocking on the door to get that rebate back..." bull$hit
well, i hope its not true coz we just sent in our first check for our 1st payment, and also being our last as well - paying it off!

for those who wants to pay off, simply call toyota finance number and choose "payoff" option to get your remaining balance which stays effective for 10 days. Then send in your check, making sure it will get there in 10 days, and you should be golden!
 

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When you sign up to get the rebate dealer tells you "... you must make 6 months of payments before refinancing or paying off or they will come knocking on the door to get that rebate back..." bull$hit
My dealer didn't tell me that and the paperwork made no mention of early payoff or refinance penalties. I paid my TFS loan off six weeks after purchasing the car. No problems.
 

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My stealership said the same thing about making 6 payments. I refinanced after 2 weeks for about half the interest rate (2.67 vs 5.99).

None of the loan documents mention any penalty for pre-payment.
 

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I was told the same thing that I needed to make 6 payments before refinancing loan by my dealership so I just bailed on the deal. I think it should be illegal to do that as it is fraud. I had a Honda dealer ask me to sign a document that I wouldn’t refinance for 3 months and I did it in my ignorance but the rate was closer to my bank anyway so no big deal.
 

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For those of you buying and paying off, are you really paying it off or refinancing?

I was under impression putting that much cash into a car is a bad decision when interest rates are low.

Buying a new car is a horrible financial decision since you lose so much on depreciation
 

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Why pay more than you have too? Interest always equals paying more for the car; even if its a dollar. If you have the liquid capital you should do it. Thing is most people don't have the capital. And new car interest rates are "ok" 3-4. I don't consider them low.
 

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It's a math problem. If the interest rate on the loan is 1% and you can make 3% from investments, you use the money on the investment.

Early payment penalties are a YMMV type of thing. So, check your state, contract, make sure there's no shenanigans that are being pulled. For instance, a dealer could conceivably finance you at the same rate as the manufacturer offering but through a third party, and who knows what's in there. The finance office is the most dangerous place in the dealership.

Why zero interest? Because if you don't pay off the installments, you get tagged with a big hit. Walmart isn't known for it's 800+ credit score clientele. Car dealers do it to move product. I have a big preference for my credit union. They have the best rates I can find, other than one of the special interest rate dealers from a manufacturer.
 

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Why pay more than you have too? Interest always equals paying more for the car; even if its a dollar. If you have the liquid capital you should do it. Thing is most people don't have the capital. And new car interest rates are "ok" 3-4. I don't consider them low.
This is bad financial advice and contrary to nearly every financial advisor mantra.

First 3 percent is low and is cheap money

Second buying a new car is one of the worst financial decisions you can make, you immediately lose thousands in depreciation

Third, your cash could be working for you elsewhere

Fourth having all your money tied up in a depreciating asset that is not liquid is a bad idea

Fifth putting the risk of nonpayment on the bank is better, once you pay cash its out the door and you cant get it back. But if you get sick, you lose your job etc you are better off having 30k in emergency fund than tied up in a vehicle

It's called opportunity cost. Right now you can get 3 percent which historically is pretty low.

Rav4 new is a bad purchase. You overpay and dont get a deal. I got a Corolla for 0 percent for 60 months.

Why in the world would anyone pay cash?
 

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Discussion Starter #12
Why in the world would anyone pay cash?
To sleep well at night.
Because you have it and more.
Because you expect many of your investments to be in near zero or negative yield territory over the life of a potential loan.
Because you like a clean transaction where you can see exactly what you are going to pay for an item without a lot of extras clouding the picture. (Same reason I sell my old car and don't trade.)
 

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This is bad financial advice and contrary to nearly every financial advisor mantra.

First 3 percent is low and is cheap money

Second buying a new car is one of the worst financial decisions you can make, you immediately lose thousands in depreciation

Third, your cash could be working for you elsewhere

Fourth having all your money tied up in a depreciating asset that is not liquid is a bad idea

Fifth putting the risk of nonpayment on the bank is better, once you pay cash its out the door and you cant get it back. But if you get sick, you lose your job etc you are better off having 30k in emergency fund than tied up in a vehicle

It's called opportunity cost. Right now you can get 3 percent which historically is pretty low.

Rav4 new is a bad purchase. You overpay and dont get a deal. I got a Corolla for 0 percent for 60 months.

Why in the world would anyone pay cash?
Because in two years I will have 100% equity for a new vehicle that will get better mpg's and two years after that I will do it again, no interest paid, new safe cars, or I can pay Toyota 4-5 Thousand in interest on each new car and always be underwater on the loan.

You should've bought a corolla hybrid.
 

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Well the assertion that you only have to make one payment while accurate in reality isn't so simple...I think Toyota knows that.

To refinance you have get another loan and then pay off the balance with Toyota, right?

Well no lender will grant you a new loan if you don't have the title.

Some states take months to get you a title. In the meantime unless you have the cash to pay it off you are stuck with the high rates from Toyota (in our case they are more than 2% higher than what we can get through our local lender).

And the state can't even process your title until the dealer walks in to pay the fees and apply for the title.

It took our dealer more than two weeks after we bought the car to do that. I can see an unscrupulous dealer taking awhile to do so knowing that delays in getting the title means you pay toyota that high interest for a longer time.

I was a sucker. I asked multiple times and was assured the title issue--which I knew about--was no longer an issue. We have about a month to go but you can't even get ahold of the state DMV here and their website says don't even bother to call us until two months or more has passed without your title--and that it can take up to 6 months!

I will not agree to take any manufacturer financing on these deals anymore unless the terms are better than what I can get locally.
 

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Because in two years I will have 100% equity for a new vehicle that will get better mpg's and two years after that I will do it again, no interest paid, new safe cars, or I can pay Toyota 4-5 Thousand in interest on each new car and always be underwater on the loan.

You should've bought a corolla hybrid.
Corolla Hybrid didnt exist when I purchased

So you are taking a massive depreciation hit over and over again and wasting thousands of dollars

I don't understand that.

You claim to "save" money by not paying interest but you are repeatedly making a terrible financial decision by losing thousands of dollars in depreciation in the first two years of ownership.

Fuel economy is a very small part of the equation and many cars get north of 30mpgs and have done so for the past 10 years.

Many of the reasons you guys list are emotional reasons. You are losing opportunity cost big time.

If your car gets totaled or stolen you get a huge loss in the form of a check, less thousands of dollars of depreciation.

If my loan at 2.9 percent gets stolen or wrecked a few months in I dont lose thousands in depreciation.
 

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...So you are taking a massive depreciation hit over and over again and wasting thousands of dollars. I don't understand that....
For some people, money isn't the only consideration when purchasing cars. If it was, they may walk or ride a bike - or drive a 30 year old car. I've probably "wasted" close to $100,000 in my lifetime in depreciation on the vehicles (cars, trucks, boats, dirt bikes, snowmobiles, RV's, etc) I've purchased. In hindsight, I'd do it again. Adding that $100,000 to my investments wouldn't change my life in any way but I enjoyed the experiences over the years with the various new vehicles I've owned. Money has no value until it's spent. Otherwise it's just a number on a statement.

I'm not suggesting people who have little money should over-extend themselves to buy new vehicles every couple of years. I'm simply saying if you have the money and enjoy new stuff - go for it!
 

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We already have a predator on the board advertising to happily buy 19 hybrids that folks are already looking to rid themselves of. They don't show up unless they know it's a good deal...that ought to tell the folks looking to get out already something.

To me there's the financial aspect but also the reality that isn't being considered by knee jerk reactions to jettison a still new vehicle with an unknown problem.

For one, if you think you will find you next vehicle totally trouble free, good luck.

The caveat has been there for years with good data to back it up--if you buy a first year of production model, you always run a very high risk of having some problems that weren't caught or were not addressed by the manufacturer show up.

I generally avoid first year new models because of that, but toyota's rep and how much the hybrid stands out from others made me take the gamble.

By toyota's rep I mean their attention to fixing problems and being more trouble free than most other brands. I've seen nothing to dissuade me from my belief they are good at that as they address the tank fill issue or otherwise. In a few months I have heard a number of stories about them pulling vehicles in delivery to fix an issue before the car is even delivered to the dealerships, and I think most of us that have gone through the formal case management process (and are still working through it) have been treated well.

I still think toyota will fix the issue at some point and that they are working hard at doing so now. I've not heard of other major issues with the new hybrids and most seem to love them otherwise.

If I had the money I'd be glad to join those willing to purchase problem rav4's at a discount!
 

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I agree Bert. But money DOES matter to these people because they claim to be "saving" money by avoiding a relatively modest interest charge yet they are repeatedly kicking themselves in the nuts with huge depreciation losses.

Any nobody buys a Toyota for enjoyment...they are boring reliable economy cars.

I've had many nice German cars including BMW etc...

But to claim it is financially wise to put down huge cash on a car with a low interest rate is just not true

You could be using that money in much better ways
 

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Second buying a new car is one of the worst financial decisions you can make, you immediately lose thousands in depreciation
In 99.9% cases and people throw money left and right on car purchases or trades, heck people trade a brand new car immediate to another one just like that just because they don't like headlights while loosing $5k in the process... I am guilty doing that as well in the past, (I bought a brand new sedan and realized I need CUV a year later) but no more. Last car I bought brand new 12 years ago and Rav4 will continue that pattern. I also prefer buying brand new cars and getting extended warranty because every repair beyond warranty costs $$$.

Third, your cash could be working for you elsewhere
Definitely... but you still need a car to get you around.

Fourth having all your money tied up in a depreciating asset that is not liquid is a bad idea
That really depends, you may need a reliable car to get you or your family to A & B so there is no way around that.

Fifth putting the risk of nonpayment on the bank is better, once you pay cash its out the door and you cant get it back. But if you get sick, you lose your job etc you are better off having 30k in emergency fund than tied up in a vehicle
You need to be smart about that, if you are giving all your hard earned cash then it's a bad idea obviously, but you should always plan for emergency and have enough cash to live for at least 6 months

Rav4 new is a bad purchase. You overpay and dont get a deal. I got a Corolla for 0 percent for 60 months.
This is pretty far from truth and a looooot of depends. Your Corolla is a bad purchase too because you could've gotten 5 year old Corolla or a bicycle and saved bunch of money... Or another scenario where Corolla is a bad purchase is that you got married, had couple of kids and suddenly your Corolla that you bought 2 years ago doesn't fit your lifestyle or family size and then you end up getting Rav4 afterall.... Or lets say you decided to buy a trailer to tow stuff.... Or you moved to a snow country where getting around without AWD is a pain... anyway, there is way too many scenarios when any (new or used) car is a bad purchase and you should just get a bicycle...

Why in the world would anyone pay cash?
As someone said to sleep better. If you are financially stable and have plenty of money saved up why not pay cash, nothing wrong with it. Especially if you are planning to do this once every 10 years....
 

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Discussion Starter #20
I agree Bert. But money DOES matter to these people because they claim to be "saving" money by avoiding a relatively modest interest charge yet they are repeatedly kicking themselves in the nuts with huge depreciation losses.

Any nobody buys a Toyota for enjoyment...they are boring reliable economy cars.

I've had many nice German cars including BMW etc...

But to claim it is financially wise to put down huge cash on a car with a low interest rate is just not true

You could be using that money in much better ways

And the BMW was totally reliable so you kept it long enough for the depreciation to become reasonable? Every high end car I've ever bought had massive depreciation. And most I bought used so the big depreciation hits had already been taken by the first owner.

I took the money to buy out of a convenient local bank paying maybe 1%. Over the projected life of my ownership of this car, I didn't expect that money to be able to earn your 3%. Yes my I-bonds have and will. And my stocks have and probably won't. And I didn't borrow to finance the car.

Granted not everyone is in a position to do that.

I bought my first hybrid very much because it was so different. Its green factor and MPGs were pluses but it was that it was so different that attracted me. So gasp I bought a v wagon for enjoyment as well as practicality, sold a CRV and a Porsche when I bought the v.
 
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