Folks, my lease for a Toyota Rav 4 Sport is up this July. I’m left with a few choices. The Rav has under 15K miles and is 2013 model, so essentially brand new. I traveled so much the last few years, it didn’t give driven much at all. I like this Rav 4, and the new versions (1) look more like a station wagon than small SUV and (2) no V6 offered now, so I would not go with another Rav 4 regardless.
The buy out is approx $ 17k. That’s not a bad price for what’s essentially a brand new Rav 4 Sport loaded with V6. I could purchase in cash, or get a used car loan from the bank or credit union (not sure of rates but I’d expect quite low), or turn it in and lease something else. A small SUV, with 4WD, and some nads from a V6, fits my needs well, but few now offer the V6.
Of my current options, what makes most sense? If the car had its usual miles of 15k per year for the 36 month lease, I’d just turn it in and repeat as I have for many moons.
$17K is an excellent price to just buy and keep what you’re driving, especially if it suits your needs. At only 15K miles it will undoubtedly last a long time, and you can either pay cash or pay it off very quickly. It really comes down to how much you like the Rav4. Either way, buying or leasing something else will likely be more expensive.
I believe the loss of the V6 had to do with pressure from the gubment that manufacturers have to make MPG standards. Not sure how the formula works for the manufacturers, but I think that’s the main driver. Ford Escape only comes in 4 now too, and there’s essentially no small SUV offering a V6 now. The interior of the Rav lacks compared to others, but the engine more than makes up for it. It’s a great V6 that’s been a winner for Toyota a long time. I didn’t try that site, but will check it out.
The main issue is, pay cash and that’s 17k that could be working for you in other investments or finance allowing that $$$ to be used for other possibly more profitable things? I need to see what the rates are for it, which is what would be the decider I guess.
As everyone said, if you like your Rav4, I would keep it. My only worry would be that even though the miles are low, it is still past the 36mo warranty period. Yes Toyotas are reliable, but you never know. Always scares me for a daily driver.
I also agree that its a shame that small SUVs don’t come with V6s anymore. I found the cure in a SantaFe Sport 2.0T. Yes its a 4 banger, but with a turbo the power is more than enough.
I would hate to give up the cash, for me its better to retain it in an investment account or even bank account that give it to the dealer. Not sure what the used car loan rates are now, but if the interest is less than the rate of return on an investment that money could bring, might be better off with the loan.
With my credit union rates are silly low right now, so I would probably take out a loan for it even if you have the cash sitting in the bank. Rates won’t always be this low and you might want the cash for something else. I wouldn’t suggest this if rates were higher than 3-4% but I think they’re around 2.45% here. You may be able to do even better than that.
As for keep or not, I think you already decided, but I’ll just say I’ve bought five new vehicles in the last 15 years. Of those I genuinely liked ONE, which I kept 5.5 years, and traded because I was worrying about its age and condition. The replacement (a brand new Honda Pilot) hasn’t been so great, and in hindsight I wish I had just kept the older Suburban. I’m probably going to end up buying another one anyway, hopefully to keep for 8-10 years. If you find something you truly like, keep it as long as you can.
Do not pay cash. The cost of borrowing, assuming you have good credit, is cheap right now. Just went through USAA(don’t know if you are eligible) and have a 1.9% loan. The rate you earn on investing the $ vs. the rate you pay on the loan makes financing an easy decision. Also, if you are the only owner of the car, know its history, and know it hasn’t been abused…then I would keep it for several yrs. and see how much better it rides and looks once paid off.
If the % is less than or equal to what you can get a guaranteed return on your $17,000 it is a no brainer. (Think FDIC CDs, T-Bonds, etc)
If you don’t have a guaranteed return that is greater than the loan, it becomes more complicated. Then you need to determine what your risk adjusted return is going to be on your $17,000 and see if that is greater than your loan amount. If it is, go for it. If not, then you will need to determine how lucky you feel.
Sure, the stock market has been paying back multiple % point higher than your average loan %, but that isn’t guaranteed. Far from it, you can lose 50% of it in an instant.
Personally, I don’t borrow money on things that are guaranteed to go down in value unless I am getting something worth more in return. For example, I borrowed $1,500 on my last new truck purchase because I got an extra $2,000 off the price for a cost of like $36 in interest. The dealership got an incentive from GMAC to get someone signed up with a loan, no matter what the amount was.
No matter how few miles or how good of a condition the Rav 4 is, it will continue to go down in value and you should take that into account when you are looking at how much more you can earn with that $17,000.
I would hate to lose $8,000 of the $17,000 in a stock market decline and also owe $16,500 on a vehicle worth only $15,000 or such.
Don’t forget that where the car lived affects it’s value to many of us. I car from Boston is not as desirable as one from Phoenix. Before I did anything I would check the Blackbook value.
First check the value of the Rav4. Around here those things hold their value well. If you are already in the green then borrowing is an easy choice for me. You already are use to the payments and for me its much easier to budget 300 bucks a month than to save up 17,000 dollars.
We have 2 loans w/USAA. A new car(stupid, should have bought like new used and taken advantage of deprec.) loan at 1.9% and a used car loan(2.78%) just taken out on a 2014. We also each have all 3 scores over 800 so also helps. Cost of borrowing can be affected by several factors. If you are over 800 with all three scores, good job, assets, etc. I would talk to local banks about what they may offer you. The rate you see advertised applies to the general public; not everyone.
Exactly what I would do. Banking has a side to it not many see. Everyone with any kind of assets should be personally recognized by AT LEAST one person when they walk into their bank. Being born and raised in the South, I would relate it to the good 'ol boy network(which is a good thing). The banker knows you. He knows you have good credit. He knows you have some assets. Quite possibly some mutual friends/acquaintances. He knows you have a job. He’s met your wife and kids. You specifically talk to him every so often. He knows you are a hard worker with a sense of integrity. Guess who gets a lower rate than the general public? Of course, meeting all of these qualifications is impossible for most of the population so actually having a personal, working relationship with a bank is not even on their radar, know how, or ability.
Using credit scores as an indicator for home/car loans is a new phenomenon. Prior to roughly the beginning of the 90’s, the personal relationships I described above were extremely important factors in loan considerations. Many influential(higher ups in the corp.) banking industry members are older and remember these days when judgement was used, not just stark metrics. They are now the ones in positions to lower rates when an excellent customer comes in for a loan and they haven’t forgotten, nor stopped using, some of the old metrics. I have seen this personally and rely upon it. My FIL recently retired as Executive Vice President of one of the country’s largest banks. He has confirmed repeatedly the importance of these personal relationships when decisions are being made.
Talk to the CU, see what your monthly payment is going to be. I suspect that if you’re willing to treat it as another 3-yr lease, you’ll be at basically the same price in three years but you’ll own a recent vehicle completely in the clear.
CU Auto Loans are going to be the best price, and since you’re securing financing from a third party, as far as the dealership is concerned you’re paying cash (try and negotiate them down as much as possible).
$17k for a Rav4 you know the history of is really not too bad, if the interest rate for it is within reason then that sounds like the most practical plan - realistically it’s another 6 years from needing any sort of significant maintenance (maybe timing chain, bearing repack, brakes and tires on top of oil changes - that’s trivial), so that’s going to be a really affordable to operate automobile.
That’s what I love about my bank. I walk in the door and everyone knows who I am. The president told the mortgage people to write our construction loan with minimal documents because he knew my wife and I, what our employment was like, where our home site was and what home values were in the area.
