CHICAGO – Toyota owners looking to trade in their cars have little reason to sing the carmaker's old ad slogan, "I love what you do for me — Toyota!"
Recalls and a bungled response to safety questions are putting a dent in the resale values of their cars. For years, Toyotas have been praised both for high quality and maintaining their worth. These days, the Toyota in your garage is no longer like money in the bank.
Some dealers are refusing to accept Toyotas for trade, while others are paying considerably less than they did just two week ago. Kelley Blue Book has dropped the value of recalled Toyotas by as much 3 percent. The auto research Web site Edmunds.com estimates resale or trade-in values could fall up to 10 percent in the short term.
The decline will likely continue as long as uncertainty and defects continue to shadow the world's No. 1 carmaker.
Toyota Motor Corp. has so far recalled more than 7 million cars in the U.S., Europe and China over a sticky accelerator and floor mats that can get caught in the gas pedal. Its prized Prius hybrid — which is partially powered by electricity — is under investigation for momentary brake failure. The company is expected to announce its plan for fixing that model this week.
Kelley, which two months ago named Toyota the best brand for resale value, says recalled models are now worth $200 to $500 less per car. Another cut of the same magnitude is planned as soon as the coming week unless the recall controversy abates and demand for Toyotas stops declining, Kelley spokeswoman Robyn Eckard says.
Similarly, since the first recall for sticky accelerator pedals on Jan. 21, Edmunds' estimate for the trade-in value of a 2009 Toyota Camry has fallen by 4 percent to 6 percent to $13,967 while the 2009 Toyota Corolla has declined 6 percent to $11,233.
"My advice to a consumer would be 'If you don't have to trade one in, wait,'" says Michelle Krebs, senior analyst for Edmunds. "Values will stay down for a bit. But Toyota's got really strong brand equity."
The news has unnerved more than a few consumers who had viewed Toyota as a bulletproof brand for quality.
Laura Benin, 34, of New York City chose a 2009 Corolla for her first car purchase a year ago because of Toyota's stellar reputation. Now she's reluctant to drive her car even after the potential acceleration problem is fixed, but knows this is a bad time to try to sell it.
"It's a little bit scary to think the car with the greatest reputation for safety is in the situation it's in now," she says.
Those who are anxious to sell without waiting for a value rebound can turn to the Japanese automaker's rivals. GM, Ford and Chrysler all have announced similar programs that involve offering $1,000 in incentives to Toyota owners who buy their vehicles.
Car dealers are also facing uncertainty.
At River Oaks Chrysler-Jeep in Houston, general manager Alan Helfman told his used car manager to knock 30 to 40 percent of the book value off any recalled Toyotas or Prius hybrids traded in.
"You've got to get them fixed," he said. "You've got to take them in at greatly reduced value."
Chuck Eddy, a Chrysler dealer in Youngstown, Ohio, said he's heard of other dealers refusing to take recalled Toyotas in trade, but said he'll still take them at reduced values.
Two auction houses, where dealers sell trade-ins if they decide not to keep them, have told his dealership that they won't take recalled Toyotas due to legal liability fears. Eddy says customers are nervous about buying Toyotas and the auction houses have further limited his resale options.
Despite the problems, many drivers appear to be sticking with the brand, however uneasily. Leasetrader.com, which acts as matchmaker between buyers and sellers of car leases, says that of several thousand people on a waiting list to take over Toyota leases, fewer than 30 have canceled.
American drivers pushed Toyota's reputation to an unrealistically high level and now a natural adjustment will occur that benefits Ford and General Motors, says John Wolkonowicz, a senior auto analyst for North America at IHS Global Insight in Lexington, Mass.
"I don't think Toyotas are going to suddenly become undesirable on the used car market," he says. "It's just that they have been taken down from this lofty position that they couldn't possibly live up to forever."
Jack Fitzgerald, who owns 12 dealerships including two Toyota stores in the Washington, D.C., area, said he would buy every used Toyota he can get because he's confident they will retain their value.
Fitzgerald said the recall concerns are overblown and should pass quickly once Toyota gets the repair parts to dealers.
"I'm buying every one I can get," he said. "I can't wait for the village idiot to dump his Toyota for nothing. I can certainly make money on it."