My Son is buying a 2017 Toyota RAV 4

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CWRadio
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My Son is buying a 2017 Toyota RAV 4

Post by CWRadio » Mon Oct 09, 2017 6:47 pm

My son negotiated a price for a 2017 Toyota RAV4 for $27,000 out the door.
He had a few question for me:

Take 0% interest for 4,5 or 6 years.
or
Take the $3,000 Toyota rebate and add another $10,000 and take a loan for 5 years at 2.99% Loan for $14,000 ($27,000 - $13,000 rebate plus addition cash)
or
Take the $10,000 and leave it in the bank and take out money monthly to reduce the monthly payments. Interest rate still 2.99% for $24,000 ($27,000 - $3000 rebate).

My son told me the car was manufactured in December 2016 and has 35 miles on. Should he be concerned that the RAV4 was setting on the lot for 10 months?

Any other ideas and advice would be appreciated. Paul

obgraham
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Re: My Son is buying a 2017 Toyota RAV 4

Post by obgraham » Mon Oct 09, 2017 6:56 pm

Personally, I'll always take the free cash in hand, and opt for less debt. Especially if he already has the $10k sitting ready.

So for me it's the rebate and the smaller loan.

thangngo
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Re: My Son is buying a 2017 Toyota RAV 4

Post by thangngo » Mon Oct 09, 2017 7:20 pm

Ask him whether he has the cash to pay off the car right now? If not, tell him do not buy the car. If yes, then take the deal which has the lowest price.

N10sive
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Re: My Son is buying a 2017 Toyota RAV 4

Post by N10sive » Mon Oct 09, 2017 7:30 pm

Depending on your state sales tax the option for the 5 year 2.9% apr with 10k down and 3k back will be close to 1.1k in interest assuming a 6.5% sales tax over the course of the loan. So you maybe get 2k, probably less, of that 3k unless you pay it off sooner.

If you think that is the best option, then after a month or so I would refinance with a credit union for .9% or 1.9% financing to lower the interest burden.

Other questions would be how stable is his job? Can he pay off the loan at any time? Does he like large monthly payments? etc.

adamthesmythe
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Re: My Son is buying a 2017 Toyota RAV 4

Post by adamthesmythe » Mon Oct 09, 2017 7:33 pm

thangngo wrote:
Mon Oct 09, 2017 7:20 pm
Ask him whether he has the cash to pay off the car right now? If not, tell him do not buy the car. If yes, then take the deal which has the lowest price.
Buying a reliable, moderately priced new car with a loan is a reasonable choice for a young person with stable employment and no significant other debt.

I wish I had done the same when I was starting out in my first job. I bought a cheap used car. I could have easily afforded a good one and traveling would have been much less stressful.

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Re: My Son is buying a 2017 Toyota RAV 4

Post by deltaneutral83 » Mon Oct 09, 2017 8:19 pm

adamthesmythe wrote:
Mon Oct 09, 2017 7:33 pm

Buying a reliable, moderately priced new car with a loan is a reasonable choice for a young person with stable employment and no significant other debt.

I wish I had done the same when I was starting out in my first job. I bought a cheap used car. I could have easily afforded a good one and traveling would have been much less stressful.
Plenty of "in between" room with a new car and cheap used car.

finite_difference
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Re: My Son is buying a 2017 Toyota RAV 4

Post by finite_difference » Mon Oct 09, 2017 8:28 pm

So you can’t get the $3,000 rebate if you take the 0% interest deal?

I would do 6 years at 0%. That’s -2% real. But I like debt that’s below inflation. It pays you! And you can use your money to fund a Roth IRA, pay more into 401k, etc.
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Wildebeest
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Re: My Son is buying a 2017 Toyota RAV 4

Post by Wildebeest » Mon Oct 09, 2017 8:32 pm

I bought a 7 year old Plymouth Valiant ( 1967) as a first car many moons ago. It was a horrible car. ( I had spent an inordinate amount of time researching what car to buy and that did not help me one bit). I have had a lot of cars since but none as bad as the Plymouth.

I hope it works out for your son, but my suggestion is he has to make his own mistakes and buying a new car is not an auspicious start. Nor is buying a Plymouth Valiant no matter how many hours of research were invested.
The Golden Rule: One should treat others as one would like others to treat oneself.

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Re: My Son is buying a 2017 Toyota RAV 4

Post by 123 » Mon Oct 09, 2017 8:37 pm

After driving clunkers in college I bought my first new car six months after I got my first real full-time job. It was easy to pay cash since I saved over 50% of each paycheck. Even back then I was exhibiting Boglehead tendencies. I was looking for reliable basic transportation. After reading Consumer Reports I saw a newspaper ad for the model I wanted (of course the basic models, with the lowest prices, are the ones that were advertised back then). When I went to the dealer's lot to look at it the salesman was quick to point out, it was a pretty basic model with an automatic transmission and an AM radio. He apologized that it only had rubber floor mats, no carpeting. I ecstatically beamed back at him, that's exactly what I wanted, it's great you've got it in stock, I won't have to special-order one without carpeting. I'm sure he may have lost points with his sales manager for selling the low-ball advertising car on the lot but I was a happy camper.

Edited to add:
By happenstance the car I bought was a Plymouth and it ended up being a clunker. The windshield leaked in the rain and the dealer could never fix it right, eventually I went to a glass shop and they simply removed and replaced it with a new sealing gasket. The car would occasionally die/stall on left turns, again the dealer would fiddle with adjustments but didn't remedy the problem. Eventually I just bought myself a new carbuerator, installed it, and solved the problem. One time a brake hose burst when I was exiting the freeway, by then (2 years) I had given up on the dealer and just went to a parts store and bought/installed the hose myself.
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Re: My Son is buying a 2017 Toyota RAV 4

Post by Dottie57 » Mon Oct 09, 2017 9:14 pm

Wildebeest wrote:
Mon Oct 09, 2017 8:32 pm
I bought a 7 year old Plymouth Valiant ( 1967) as a first car many moons ago. It was a horrible car. ( I had spent an inordinate amount of time researching what car to buy and that did not help me one bit). I have had a lot of cars since but none as bad as the Plymouth.

I hope it works out for your son, but my suggestion is he has to make his own mistakes and buying a new car is not an auspicious start. Nor is buying a Plymouth Valiant no matter how many hours of research were invested.

My parents had a Valiant too. It was the worst car they ever had. The springs in the drivers seat broke and dad looked extremely short driving the thing.

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Re: My Son is buying a 2017 Toyota RAV 4

Post by nanoanalyzer » Mon Oct 09, 2017 9:16 pm

Having done this a few times, rebate and max finance, then refinance at 1.9 or lower elsewhere. Just doublecheck the terms of the contract for early payment penalties.

He may be able to get another $500 customer cash and $750 recent grad on top of the $3000 dealer rebate.
https://www.edmunds.com/toyota/rav4/201 ... ncentives/

Also, check autotrader for a similar model within 500 or so miles. If this is an XLE, that's a decent deal. If this is an LE, he can do much, much better.
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Mr.Wu
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Re: My Son is buying a 2017 Toyota RAV 4

Post by Mr.Wu » Mon Oct 09, 2017 9:30 pm

Toyota strengthened the driver's side to pass the small overlap crash test, but apparently it didn't bother with the passenger side.

http://www.iihs.org/iihs/news/desktopne ... rs-at-risk

inbox788
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Re: My Son is buying a 2017 Toyota RAV 4

Post by inbox788 » Mon Oct 09, 2017 11:18 pm

Mr.Wu wrote:
Mon Oct 09, 2017 9:30 pm
Toyota strengthened the driver's side to pass the small overlap crash test, but apparently it didn't bother with the passenger side.

http://www.iihs.org/iihs/news/desktopne ... rs-at-risk
That's sneaky, just like when they reinforced only the center of the bumpers because that's what was tested. You can run into a telephone phone on the driver side as much as on the passenger side, so it makes sense to reinforce both sides. Still, since we drive on the right hand side, the driver is more exposed to opposing cars crossing the center divider. And there is always a driver, and not always a passenger. So better ROI and value to do the driver side, which is what the bean counters were thinking.
The rear bumpers for both the Honda Accord and the Toyota Corolla were reinforced in the center, but only so the car would perform well in the pole test, Lund said. Because of that, testers moved the pole from the center of the bumper to the side to get a more accurate measure of the car's performance.
http://money.cnn.com/2002/12/03/pf/auto ... /index.htm

As far as the financing of the vehicle, it's pretty much indifferent what you do, but if you take the 0% free money loan, might as well take it for 6 years vs only 4 or 5. What would you do with the $10k or $13k cash if you took out a bigger loan? If the after tax return is < 3% and you don't need the liquidity, then might as well pay down the loan. If you think you can get 5-6% or more in the market and > 3% after taxes, and don't mind the risk, you could statistically arbitrage the funds. Just realize you could do better or worse and take your chances.

mega317
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Re: My Son is buying a 2017 Toyota RAV 4

Post by mega317 » Tue Oct 10, 2017 12:35 am

Well don't leave 10,000 in the bank earning 1.2% while he pays interest at 2.99%.

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White Coat Investor
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Re: My Son is buying a 2017 Toyota RAV 4

Post by White Coat Investor » Tue Oct 10, 2017 1:05 am

I think cars are best bought with cash as a philosophical thing. It's not that buying one with 0% financing is crazy, but I don't know very many wealthy people who do that now or did it while they were becoming wealthy. Maybe it's just a status symbol to be able to not owe money to people.
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Re: My Son is buying a 2017 Toyota RAV 4

Post by TomatoTomahto » Tue Oct 10, 2017 5:54 am

White Coat Investor wrote:
Tue Oct 10, 2017 1:05 am
Maybe it's just a status symbol to be able to not owe money to people.
Once, I wanted to take advantage of some ultra low rate (from PenFed as I recall) and finance a new car purchase. The ordered car was late in arriving from overseas, and PenFed's loan offer had a time limit, and it was a royal PITA. I decided to use cash.

Another time, the dealer had some kind of incentive, after we had agreed on the price, that made it "wise" to finance for at least a few months. I did that, but then realized that the title wouldn't be handed over right away, and the insurance situation would get fuzzy, and so on.

I only buy cars for cash now.

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Re: My Son is buying a 2017 Toyota RAV 4

Post by Jack FFR1846 » Tue Oct 10, 2017 6:35 am

I would be concerned about the age and mileage of this so called "new" car. I have test driven cars where the speedometer/odometer didn't work. The salesman told me that it gets hooked up during dealer prep. What really happens is that the dealer disconnects the instrument cluster and drives the car for many miles without it registering. I'd be concerned that this year old car has 10k miles on it.
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jabberwockOG
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Re: My Son is buying a 2017 Toyota RAV 4

Post by jabberwockOG » Tue Oct 10, 2017 7:27 am

CWRadio wrote:
Mon Oct 09, 2017 6:47 pm
My son negotiated a price for a 2017 Toyota RAV4 for $27,000 out the door.


My son told me the car was manufactured in December 2016 and has 35 miles on. Should he be concerned that the RAV4 was setting on the lot for 10 months?

Any other ideas and advice would be appreciated. Paul
That's a long time to be sitting on a lot. If that is the only old one on the lot I'd avoid regardless of what dealer tells you. That car will take a huge depreciation hit as soon as the 2018s hit the lot so make sure the purchase discount is very deep. If he has an accident in November 2017 and it is totaled he may not get anywhere close to cost back because the car is technically 2 years old for market valuation purposes.

I'd want to know why exactly why it was not sold much earlier - some possibilities -
- Maybe drastic over supply - ask to see how many other RAV4 on their lot have old manufacture dates - pick a much newer one if possible. If they are all 8-11 months old I'd lower my buy offer.
- Maybe a bad color or options mix that no one wants
- maybe some internal cosmetic accident required repair/new parts
- maybe some mechanical issue required repairs/new parts

fittan
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Re: My Son is buying a 2017 Toyota RAV 4

Post by fittan » Tue Oct 10, 2017 9:31 am

I would select option 2.

First and foremost, I would take the cash rebate. The total interest you end up paying after 5 year is $1868. So total cost is $24K + $1868. Deduct this from $27K, the rebate option will save you $1132.

One question I have for you....who will be the loan under? I assume your son is quite young and may not have built up his credit yet and loan would be under you? In this case, this car purchase would be an excellent way for him to build credit, and learn life long lessons to be responsible for his finance etc.

To summary, I would
1) take the $3K
2) put down $10K down payment
3) take a loan for 2.99% UNDER SON'S NAME, even if he can't qualify for 2.99% and have to pay higher rate I would do it too and
4) advice son to pay of loan as soon as possible (say 3 years). Show him how much interest (about $30+) he is "wasting" each month.

Good luck

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Re: My Son is buying a 2017 Toyota RAV 4

Post by ten2go » Tue Oct 10, 2017 9:34 am

I'd use the $10K to buy a used Accord or Camry. Save your money the next few years and only buy a new car once you can afford to pay for it in full.
It is good to avoid starting a cycle of car loans. Some people never get out of it. If he has $10k set aside for a car, he is off to a good start.

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Re: My Son is buying a 2017 Toyota RAV 4

Post by bloom2708 » Tue Oct 10, 2017 9:43 am

Get an insurance quote for full coverage/comp/collision before buying. Also factor in yearly licensing/taxes on a new car for a young person.

You can buy a pretty darn nice car that is 2-4 years old that is still very reliable.

Will he want to drive a car for 8-10 years? A lot of things change in those first years on his own. Many variables to think about.
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Tallis
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Re: My Son is buying a 2017 Toyota RAV 4

Post by Tallis » Tue Oct 10, 2017 11:51 am

Dottie57 wrote:
Mon Oct 09, 2017 9:14 pm
Wildebeest wrote:
Mon Oct 09, 2017 8:32 pm
Nor is buying a Plymouth Valiant no matter how many hours of research were invested.
My parents had a Valiant too. It was the worst car they ever had. The springs in the drivers seat broke and dad looked extremely short driving the thing.
My mother's favorite car was a '62 Valiant station wagon. It would do 90 on a straightaway, and was completely reliable through 14 Montana and North Dakota winters. When they finally sold the car (bought new) in 1976 or 1977, Mom wept as it drove away. So here's one happy memory of a Plymouth Valiant.

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Re: My Son is buying a 2017 Toyota RAV 4

Post by sunny_socal » Tue Oct 10, 2017 12:29 pm

Jack FFR1846 wrote:
Tue Oct 10, 2017 6:35 am
I would be concerned about the age and mileage of this so called "new" car. I have test driven cars where the speedometer/odometer didn't work. The salesman told me that it gets hooked up during dealer prep. What really happens is that the dealer disconnects the instrument cluster and drives the car for many miles without it registering. I'd be concerned that this year old car has 10k miles on it.
The mileage is not an issue. Most new cars have similar mileage:
- Drive from factory to holding lot
- Drive from lot to a truck
- Drive from truck to a ship
- Drive from ship to another lot
- Drive from lot to a truck
- Drive from truck to a lot
- Drive from lot to another truck
- Drive from truck to dealer
- Drive from dealer to another dealer
- Drive from dealer to a holding lot
- Drive from lot to dealer
- SOLD!

See how it can add up? 35 miles is still 'new.'

But anyway, I think OP's son can get a better deal.

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DaftInvestor
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Re: My Son is buying a 2017 Toyota RAV 4

Post by DaftInvestor » Tue Oct 10, 2017 12:43 pm

Jack FFR1846 wrote:
Tue Oct 10, 2017 6:35 am
I would be concerned about the age and mileage of this so called "new" car. I have test driven cars where the speedometer/odometer didn't work. The salesman told me that it gets hooked up during dealer prep. What really happens is that the dealer disconnects the instrument cluster and drives the car for many miles without it registering. I'd be concerned that this year old car has 10k miles on it.
I've never test-driven a car that didn't have a working odometer. Was this Toyota? It certainly doesn't sound legal.

obgraham
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Re: My Son is buying a 2017 Toyota RAV 4

Post by obgraham » Tue Oct 10, 2017 12:48 pm

I agree -- a dealer that habitually disconnected the odometer and then drove the car "many miles" is a criminal. State and fed authorities will be on him like flies on unowhat.

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Re: My Son is buying a 2017 Toyota RAV 4

Post by Beehave » Tue Oct 10, 2017 12:54 pm

ten2go wrote:
Tue Oct 10, 2017 9:34 am
I'd use the $10K to buy a used Accord or Camry. Save your money the next few years and only buy a new car once you can afford to pay for it in full.
It is good to avoid starting a cycle of car loans. Some people never get out of it. If he has $10k set aside for a car, he is off to a good start.
I agree! Or, a recent used Corolla - - especially if manufactured in Ontario, Canada (you can tell by the VIN --Canada Toyota VIN starts with "2"). That plant produced incredibly reliable Corollas.

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DaftInvestor
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Re: My Son is buying a 2017 Toyota RAV 4

Post by DaftInvestor » Tue Oct 10, 2017 1:12 pm

OP: I would ask for BOTH the 3000 rebate and the 0% loan.
If he thinks he has a good deal and hasn't put a down-payment down yet he can make this the final negotiation point.
(I wouldn't be too concerned with the age of the vehicle on the lot as long as I was paying far enough below invoice price. I wouldn't pay above invoice for a soon-to-be-prior model year).

inbox788
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Re: My Son is buying a 2017 Toyota RAV 4

Post by inbox788 » Tue Oct 10, 2017 1:17 pm

DaftInvestor wrote:
Tue Oct 10, 2017 1:12 pm
OP: I would ask for BOTH the 3000 rebate and the 0% loan.
If he thinks he has a good deal and hasn't put a down-payment down yet he can make this the final negotiation point.
(I wouldn't be too concerned with the age of the vehicle on the lot as long as I was paying far enough below invoice price. I wouldn't pay above invoice for a soon-to-be-prior model year).
LOL. He can ask, but $3000 isn't "a final negotiation point". FWIW, $27k is higher end for a RAV 4 (4wd? hybrid? or just lots of options?). OP, have you compared CRV or Rogue or others?

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CWRadio
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Re: My Son is buying a 2017 Toyota RAV 4

Post by CWRadio » Wed Oct 11, 2017 8:28 am

Thank you all for your suggestion, advice and council.
When my son called the dealer to give a deposit and they said the car was sold, but they can get the same car from another dealer(about 165 miles away) and gave him the vin number of that car.
He is waiting to view the new car.

Paul

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