What to do about Toyota now?

Marketplace Staff Feb 5, 2010
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What to do about Toyota now?

Marketplace Staff Feb 5, 2010
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TEXT OF INTERVIEW

Tess Vigeland: Toyota’s advertising slogans took more than a few hits this week. “Moving Forward,” whether you like it or not. I don’t love what you do for me. By now you’ve no doubt heard about the eight-model-and-counting pileup and recall of Toyota vehicles. This week, the company’s president publicly acknowledged the safety issues for the first time.

We asked our friend Phil Reed of Edmunds.com to come in and tell us what Toyota’s travails mean for owners and potential buyers. Welcome back Phil.

Phil Reed: Good to be here again.

Vigeland: So, first the floor mats, then the gas pedals, now the brakes on the Prius. Would you buy a Toyota right now?

Reed: At the right price I would. I mean, we’re talking about problems which are very specific and small, although essential to the operation of the car.

Vigeland: Yeah, just a little.

Reed: Absolutely, and that’s one of the reasons it’s capture the imagination of people and it’s so difficult to Toyota.

Vigeland: So almost 10 models are affected by all these issues. Eight of them have been taken off the lot, they’re not for sale. But obviously, dealers need to move some inventory, so if you do decide to go ahead and buy a Toyota — you know, based on years of reliability — is it a good time to do so?

Reed: Yes, it could be very good. Toyota salesmen are starving out there. They love the feeling of foot traffic, they love the feeling of sales. I mean, they are so driven in the car business by sales today — that’s sort of the lifeblood of the dealership.

Vigeland: So what’s it like if you walk onto a Toyota lot right now?

Reed: Well, there’s the service boy; some of the service boys have been completely overwhelmed. There’s also a fair amount of confusion, because they’ve had to pull a lot of inventory out, or at least mark them as not being available for sale.

Vigeland: What about these incentives that are being offered by other car makers, GM, Ford, I think, Hyundai was the first to say, “Hey, bring in your Toyota, we’ll give you some cash back.” Should this sway your buying decision?

Reed: Well, it’s $1,000, in some cases, is about the maximum. It does have an effect, particularly because these types of incentives, which are call “conquest incentives.”

Vigeland: “Conquest incentives.” Nice. They could call it “schaudenfreude,” I think.

Reed: Exactly. But basically it means, if you have a Toyota, you want to shop for a Ford, show them the registration on your current Toyota, and they’ll give you $1,000 off. The beauty of it is is that it can be combined with other things in most cases. So you get $1,000 on top of what other incentives, what other good financing is available on the vehicle. So it’s substantial, yes.

Vigeland: Now what about the folks who currently have Toyotas. What does this do to the potential resale value of their cars? Does it have any sort of spillover effect?

Reed: What we saw initially was a 10 percent reduction in the amount they can trade the vehicle in for. That was mainly at Toyota dealerships. We’ve had reports of a lot of people trying to turn in their Toyotas for trade-in at other dealerships such as Ford’s. And they’re also being given very low trade-in values there and in some cases, being discouraged and told to hang onto their cars for the short term. You know, now that you’re in a very weak position, this is the worst time to trade in a Toyota.

Vigeland: How long do you think this is going to be sticking to the Toyota brand. Is it worth waiting three, four months to see if this blows over a little bit?

Reed: One of the things is that it appears it’s going to take about maybe, three months, as long as three months to fix all of the cars. And until that happens, we’re going to be hearing about this. So, I would say, if you can wait, absolutely do wait. What most people don’t realize is that it doesn’t stick quite as much as you might imagine. Looking back, we have a number of historical cases. You know, we have Ford with the Firestone tire problems, we have Audi with a similar sudden acceleration problem. We look back at it for data, and we couldn’t actually see that their resale value dropped off at that time. So, in our imagination, it’s a very large problem. On the street, where money’s being transacted, it’s not as big as that.

Vigeland: Phil Reed of Edmunds.com. Thanks so much for coming in.

Reed: Pleasure to be here.

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