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Discussion Starter #1
Hey all, I don't know if this is the right place to post but I have a question.

I have a 2008 CM that is the first truck I have ever purchased. Right now, I'm paying 8% on it which I feel is pretty high. I still owe $20k on it. How does it work if I trade in to a dealership. Lets say, hypothetically, they will give me $23k for it. Will they give the $20k I owe to the bank and put the other $3k for a down payment? Again all hypothetical. $23K is just the value i pulled of KBB. I quess just want to know how trading in works when you still owe on your car. Again, this is the first car I have purchased on my own so I am new to this. I am hoping to try and take advantage of the 1.9% deal, assuming I qualify.
 

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Correct. You always will owe the original bank their money. You dealer will pay that off and whatever crumbs are left will put toward your new rig. And as your credit gets better your rate will decrease. Pay off as much of your credit as you can. Debt sux. Good luck.
 

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Correct. You always will owe the original bank their money. You dealer will pay that off and whatever crumbs are left will put toward your new rig. And as your credit gets better your rate will decrease. Pay off as much of your credit as you can. Debt sux. Good luck.
Thanks for your reply.

As of now, I have no credit card debt (knock on wood) and my cards have a $13,000 limit. All I have is the remainder on my truck and $8000 in student loans..Last I checked I had over a 720 score, but that was when I bought the truck.
 

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Sometimes all that available credit not being used is not good, either. Makes you risky in the eyes of some lenders. You never want to be on either extreme.

I think I remember reading that there is an ideal ratio of debt to open credit, like 30%? So you show usage and on-time payment without overextending yourself. Don't quote me though, my memory is not the greatest these days!
 

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Sometimes all that available credit not being used is not good, either. Makes you risky in the eyes of some lenders. You never want to be on either extreme.

I think I remember reading that there is an ideal ratio of debt to open credit, like 30%? So you show usage and on-time payment without overextending yourself. Don't quote me though, my memory is not the greatest these days!
Well there is a caviat to my no credit card dept. I had it up to about 60% and recently, about two weeks ago, paid it all off with my tax return. So I'm assuming they would see that?
 

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Correct. It should be reported to one or all three credit agency's and you should see your number make a nice jump. Lots of available credit is a very good thing.
 

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720 when you bought the truck and they could only get you 8%??!! That's sad, you should have been able to get a lot better than that. If your score is above 700 you should go and refinace thru your bank.
 

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I've found it's very hard to beat Capital One's auto financing. You can refinance with them at 4.24%. My credit union can't touch Capital One's rate of 4.25% on a new vehicle. In the Southeast, you can get either 1.9% or $2500 dealer credit towards the new Tundra's. I ran all the numbers and come out better taking the dealer credit and financing with Capital One.

Like others have said, using your hypothetical numbers, you would get $3k from the dealer to apply as down payment towards your new truck. Also, you don't pay tax on the new truck for any value you trade in. So if you get $23k in trade in value and the new truck is say $30k, you'd would only pay tax on the $7k difference. That's how it works in NC anyway.
 

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Discussion Starter #10
720 when you bought the truck and they could only get you 8%??!! That's sad, you should have been able to get a lot better than that. If your score is above 700 you should go and refinace thru your bank.
I think a lot had to do wit my age (23 when I bought the truck) and the fact that I didn't have too much credit to my name. The dealer said my dad could cosign but I would only be around 6.9%. I figured it would be better to take the 7.9 and pay the loan off myself.

I spoke to my bank, they said the best they would be able to do is about 8.5% because the truck would be conisdered used and financing on a used car is a lot more.
 

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Well there is a caviat to my no credit card dept. I had it up to about 60% and recently, about two weeks ago, paid it all off with my tax return. So I'm assuming they would see that?
They will see that it is paid off. They do not see the payment history. Before I retired from the mortgage business I had a client whose FICO was getting lowered because of excess credit on credit cards. He owed about $25,000 but he paid it off in full every month, but they treated it the same as if he was carrying the balance. I don't think the reporting to the credit bureaus is in real time. It could be on credit cards because they are so volatile, but mortgage lenders just report monthly. If you want to be safe wait a month after your payoff before you run your credit. You can also get a free credit report from Trans Union, Equifax, or Experian once a year. This will not show as a credit inquiry. You can do this online and make sure your report is accurate.

You can also save money by refinancing your existing 8% loan. It would not be as cheap as a 1.9% promotional rate, but if you have access to a credit union it would be much cheaper than you are paying. Remember that on your trade you are going to get whacked for sales tax that is the equivalent of several year's of interest at 1.9%. If you want a new truck that is another issue, but you would save more money with just a refinance.

Here's 3.99% for a USED car.
 

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Discussion Starter #12
I've found it's very hard to beat Capital One's auto financing. You can refinance with them at 4.24%. My credit union can't touch Capital One's rate of 4.25% on a new vehicle. In the Southeast, you can get either 1.9% or $2500 dealer credit towards the new Tundra's. I ran all the numbers and come out better taking the dealer credit and financing with Capital One.

Like others have said, using your hypothetical numbers, you would get $3k from the dealer to apply as down payment towards your new truck. Also, you don't pay tax on the new truck for any value you trade in. So if you get $23k in trade in value and the new truck is say $30k, you'd would only pay tax on the $7k difference. That's how it works in NC anyway.
If I get the 23k trade in value, 20k would go to my loan and 3k would go to the new truck. Let's say a 30k truck. So wouldn't I be paying taxes on $27k?
 

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They will see that it is paid off. They do not see the payment history. Before I retired from the mortgage business I had a client whose FICO was getting lowered because of excess credit on credit cards. He owed about $25,000 but he paid it off in full every month, but they treated it the same as if he was carrying the balance. I don't think the reporting to the credit bureaus is in real time. It could be on credit cards because they are so volatile, but mortgage lenders just report monthly. If you want to be safe wait a month after your payoff before you run your credit. You can also get a free credit report from Trans Union, Equifax, or Experian once a year. This will not show as a credit inquiry. You can do this online and make sure your report is accurate.

You can also save money by refinancing your existing 8% loan. It would not be as cheap as a 1.9% promotional rate, but if you have access to a credit union it would be much cheaper than you are paying. Remember that on your trade you are going to get whacked for sales tax that is the equivalent of several year's of interest at 1.9%. If you want a new truck that is another issue, but you would save more money with just a refinance.
My mom has access to a credit union through work. She called and talked to them but they would not accept the refinance. I'm tellin ya, buying a new truck is my last option. As of now I feel like I have exhausted all my options and I'm stuck with the 8% with the exception of taking advantage of Toyota's current deal.
 

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theres one online calculator i found in the past that was real good, it would show you the tax savings of trading vs selling. theres definately a tax advantage there. i dont want to steer you wrong so im not going to try to explain what i think it is all about.

im still suprised u cant get a better apr than that with a decent score. the industry sucks now.

good luck and let us know how it works for ya!
 

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Discussion Starter #15
theres one online calculator i found in the past that was real good, it would show you the tax savings of trading vs selling. theres definately a tax advantage there. i dont want to steer you wrong so im not going to try to explain what i think it is all about.

im still suprised u cant get a better apr than that with a decent score. the industry sucks now.

good luck and let us know how it works for ya!

Thanks man, I appreciate it. I will look for that calculator.
 

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Thanks man, I appreciate it. I will look for that calculator.
i looked just now and cant find it...but if i come across it again, ill post it. i was playing with it when i was trading in the corvette in 07....seeing if i was better to sell in the current market that it was in or trade it in....turns out i got as much trade in as everyone was getting for the car selling it outright....so it was a big advantage to me to do it that way. you should weigh your options too. selling is always a pain in the azz though....
 

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If I get the 23k trade in value, 20k would go to my loan and 3k would go to the new truck. Let's say a 30k truck. So wouldn't I be paying taxes on $27k?
No. It's the entire value of the trade. I did this a few years ago when I got out of Highlander and got a Camry for the wife. I got $20k for the trade, owed something like $18k on the Highlander, but only paid tax on the portion of the Camry that was over $20k.
 

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The Edmunds site has (or had) a calculator in their 'car loan' section.
 

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My mom has access to a credit union through work. She called and talked to them but they would not accept the refinance. I'm tellin ya, buying a new truck is my last option. As of now I feel like I have exhausted all my options and I'm stuck with the 8% with the exception of taking advantage of Toyota's current deal.
You may have missed my update to my post above. I found a link to a 3.99% rate for used cars.
 

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Discussion Starter #20
No. It's the entire value of the trade. I did this a few years ago when I got out of Highlander and got a Camry for the wife. I got $20k for the trade, owed something like $18k on the Highlander, but only paid tax on the portion of the Camry that was over $20k.
So say your Camry was $25k. You you got $20k for the trade. So you only paid taxes on the $5k outstanding even though you owed the bank $18K? Interesting.
 
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