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Message
Residual value on car
Posted on 11/8/13 at 12:00 am
Posted on 11/8/13 at 12:00 am
Bought 2010 Limited Toyota rav4 with all the works and 30k miles in January 2013 for $23k flat. Traded in car for $2k and put $5k down. Taxes on sale ate up the trade-in, but still had above $4k in residual from down payment. Recently looked up trade in value for kicks and saw that the est value was $17k. My payoff at this date is a little more than $16k. So, as of now, my residual value is almost gone.
Question is, will I have to hold onto this vehicle for the term of the note and keep the vehicle in ideal condition in order to trade it in 4 yrs from now (length of note) with around 90k miles and hopefully get $4 or 5k for it in order to see some benefit from the original residual?
Question is, will I have to hold onto this vehicle for the term of the note and keep the vehicle in ideal condition in order to trade it in 4 yrs from now (length of note) with around 90k miles and hopefully get $4 or 5k for it in order to see some benefit from the original residual?
3
Posted on 11/8/13 at 12:59 am to AdverseOpinion
This is precisely why you should drive a car into the ground. If you are going to buy new cars and trade in every 3-5 years, prepare to see your net worth drop sharply.
You will see zero financial benefit unless you drive it 10-15 years if not longer. If you are intent on having a nearly-new car all the time then you are probably paying $10K or so each year for that privilege.
You will see zero financial benefit unless you drive it 10-15 years if not longer. If you are intent on having a nearly-new car all the time then you are probably paying $10K or so each year for that privilege.
Posted on 11/8/13 at 6:30 am to AdverseOpinion
Who wants to drive a car into the ground? Or drive the same car for 12 years?
If you put less than 12,000 miles a year on a car, you ought to be looking at leasing it. You would have paid just $8800 with tax to drive that RAV4 for three years. Then you walk away from it and get a brand new car to drive for another three years.
BTW, you don't have any guaranteed residual value in a purchased car. You paid $23,000 plus almost $2000 in tax for a four-year-old car which is depreciating faster than the payments you're making. You'll be underwater for the remainder of your note.
From the Toyota web site:
If you put less than 12,000 miles a year on a car, you ought to be looking at leasing it. You would have paid just $8800 with tax to drive that RAV4 for three years. Then you walk away from it and get a brand new car to drive for another three years.
BTW, you don't have any guaranteed residual value in a purchased car. You paid $23,000 plus almost $2000 in tax for a four-year-old car which is depreciating faster than the payments you're making. You'll be underwater for the remainder of your note.
From the Toyota web site:
quote:
Lease a new 2013 RAV4 LE : $199 a month / for 36 months / with $999 DUE AT SIGNING. Amount due at signing includes DOWN PAYMENT of $800, FIRST MONTHLY PAYMENT of $199 and no security deposit. Tax, title and license are extra. Based on MODEL 4430, TOTAL MSRP $24690, & NET CAPITALIZED COST of $21940. LEASE END PURCHASE OPTION is $14779 plus tax, title and license. Customer is responsible for disposition fee of $350 (or less if required by state law), and excess wear & tear and 15 cents per mile over 36,000 miles. Dealer participation may affect final negotiated price and applicable taxes. NOT ALL CUSTOMERS WILL QUALIFY. Payments are calculated using TFS tier 1+ rate. Other tier credit payments are higher. Special financing available for a limited time to qualified buyers through Toyota Financial Services and participating Toyota dealers. Toyota Financial Services is a service mark of Toyota Motor Credit Corporation. Offers available in TX, OK, AR, MS, and LA only. Special lease offer requires application of $2000 GST RAV4 lease subvention cash. Dealer sets final price. Offer valid November 5, 2013 through December 2, 2013.
This post was edited on 11/8/13 at 6:33 am
Posted on 11/8/13 at 6:51 am to AdverseOpinion
You're comparing "trade-in" to Dealer Retail. There's a huge difference there. A majority of that difference is coming from the initial value you're trying to compare.
The good news is depreciation slows significantly over time (relative to initial price). Don't sweat it until you're actually looking to trade-in, or are worried about being upside down.
The good news is depreciation slows significantly over time (relative to initial price). Don't sweat it until you're actually looking to trade-in, or are worried about being upside down.
Posted on 11/8/13 at 7:05 am to foshizzle
quote:
This is precisely why you should drive a car into the ground. If you are going to buy new cars and trade in every 3-5 years, prepare to see your net worth drop sharply.
You will see zero financial benefit unless you drive it 10-15 years if not longer. If you are intent on having a nearly-new car all the time then you are probably paying $10K or so each year for that privilege.
All of this is golden wisdom.
Posted on 11/8/13 at 7:10 am to Layabout
quote:
Who wants to drive a car into the ground? Or drive the same car for 12 years?
All right - that's a good point. There are non-monetary factors in transportation. But let's recognize them for what they are - emotionally-driven and costly motivations. One needs to be honest with oneself and know that financing a car is expensive and there is no good way around it - you can be forearmed so you're not just raped at the dealership, but unless you're paying 100% cash, or financing for 36 months with 25% to 30% down, you're upside down for the length of the note.
If people financed that way, i.e. about 30% down, and 36 months, they would at least be paying for the car as they go. But most people cannot afford the car they "want" this way, so welcome to debt slavery.
Posted on 11/8/13 at 7:25 am to Layabout
quote:
Who wants to drive a car into the ground? Or drive the same car for 12 years?
middle class people with high net worth
Posted on 11/8/13 at 8:04 am to foshizzle
quote:
This is precisely why you should drive a car into the ground. If you are going to buy new cars and trade in every 3-5 years, prepare to see your net worth drop sharply.
I think there's an obvious second answer: buy used. I bought my Yukon with 60k miles for half of what it originally stickered for. 13 months and 15,000 miles later it's not worth much less than I paid.
This post was edited on 11/8/13 at 8:08 am
Posted on 11/8/13 at 8:12 am to yellowfin
Money talk Boom
Posted on 11/8/13 at 8:19 am to GaryMyMan
quote:
I think there's an obvious second answer: buy used. I bought my Yukon with 60k miles for half of what it originally stickered for. 13 months and 15,000 miles later it's not worth much less than I paid.
Those are even better deals if you drive them in the ground. I've always done better and made/saved more money with my used purchases than the new - my 3 new vehicles over the years were money sinkholes. I haven't regretted a single pre-owned purchase (although I tend to buy Toyota products in the used market).
Posted on 11/8/13 at 8:35 am to Layabout
quote:
Who wants to drive a car into the ground? Or drive the same car for 12 years?
Prodigious Accumulators of Wealth
Posted on 11/8/13 at 10:07 am to Layabout
quote:
Who wants to drive a car into the ground? Or drive the same car for 12 years?
The last car I traded in was 16 years old. I saved a lot of money by not trading up three or four times during that time period. The car before that was 12 years old.
Posted on 11/8/13 at 10:18 am to Oenophile Brah
Also leasing is the way to go if you use the vehicle for work. Huge tax break.
Posted on 11/8/13 at 12:47 pm to Layabout
quote:
If you put less than 12,000 miles a year on a car, you ought to be looking at leasing it
Bad... just bad
Posted on 11/8/13 at 11:30 pm to Oenophile Brah
OP needs to read "The Millionaire Next Door."
Ch. 4 - "You aren't what you drive." page 109 - 140.
Table 4-2. Motor vehicles of Millionaires: Purchase Price. Page 114.
Ch. 4 - "You aren't what you drive." page 109 - 140.
Table 4-2. Motor vehicles of Millionaires: Purchase Price. Page 114.
Posted on 11/9/13 at 11:56 am to matthew25
quote:
OP needs to read "The Millionaire Next Door."
exactly.
I bought a rental property this year. My car, 07 camry has a fender falling off and dents all over.
Started dating a girl and she said you should get a new car. I gave her the MND book to read and now she tells me I can get another 30k miles out of it.
Posted on 11/9/13 at 11:58 am to Oenophile Brah
They'll drive you to the cemetery in a really fine set of wheels.
Posted on 11/9/13 at 2:31 pm to Paul Allen
quote:
Also leasing is the way to go if you use the vehicle for work. Huge tax break.
tell me about those tax breaks paul
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