Despite its reputation for quality, many Toyota owners are worried about the safety of their cars because of a recent recall affecting 2.3 million cars and trucks with accelerator pedals that can stick in a partially depressed position or return slowly to the idle position. While the safety concern is certainly legitimate (though Toyota says it is very rare), it's unlikely that trading in your Toyota for another brand makes financial sense, even if the Big Three are offering deals to switch to their models.
The value of the cars in the recall is dropping right now. In fact, these recalled cars may not even be taken in trade by certain car dealers at least in the short term, since they shouldn't be sold until they are repaired.
If you are able to trade in your car, you'll be getting less than you would have in a trade before the recalls were announced. Jesse Toprak, vice president of industry trends at TrueCar.com, a Web site that follows new car pricing, says owners of Toyotas that are one to three model-years old will lose $1,000 to $2,000 in resale value. Edmunds.com's analysis is more dramatic, estimating that owners will see a 10 percent drop in the values of their used cars regardless of age.
This week, all three Detroit automakers were offering incentives to Toyota owners (and in some cases owners of other brands) to compensate for the diminished value of Toyota models while stealing sales from the Japanese automaker. General Motors was the first to offer an incentive to any Toyota owner who buys or leases a Buick, Cadillac, Chevrolet or GMC. That incentive is zero percent financing for 60 months, $1,000 cash back on a purchase or three free lease payments for up to $1,000. Ford followed GM, offering $1,000 cash back to anyone trading in a 1995 model or newer Acura, Honda, Lexus, Toyota or Scion for a Ford, Lincoln or Mercury vehicle. Chrysler also jumped in, targeting owners of the Toyota Tacoma, Tundra and Sienna, and is offering $1,000 cash back or lease discounts on any Chrysler, Dodge, Jeep or Ram truck. All the incentives run through the end of the month and can be combined with other current incentives.
So, does trading in your Toyota for a model from a Detroit automaker make financial sense? Not for most Toyota owners, if the third-party analysis from either Edmunds.com or TrueCar.com holds true, since most will still be losing money on a trade, even with the incentives. For those owners with older Toyotas who were thinking about a new car anyway, these additional incentives may be enough to allow them to at least break even on their trade and ease any worries they have about the car's safety. However, most Toyota owners would be letting fear push them into a bad financial decision.
For those who are concerned about driving, contact your nearest Toyota dealer and ask for a loaner car until your car can be repaired. While Toyota isn't officially saying that it will provide any owner with a free loaner in the interim, Toyota is sending dealers up to $75,000 to use as a goodwill gesture to its customers. Dealers can use the money however they see fit, including covering the cost of loaner or rental cars, providing free maintenance services or adding staff to get repairs done quicker.
Once your car is repaired, there should be no issues with selling it. However, you may want to hold off for a bit. The Edmunds.com analysis concludes that it will take about six months for values to fully rebound. That's assuming there are no other issues that cause consumer concern. The federal government is investigating the possibility of a defect in the electronic systems of the recalled vehicles that could be causing unintended acceleration. It also has launched a new investigation into the 2010 Toyota Prius after receiving 124 reports from consumers of a momentarily loss of braking capability while traveling on uneven road surfaces (such as bumps or potholes).
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