# Outright Buy Vs. Smartbuy, actual numbers crunched



## Tom (Nov 1, 2004)

Food for thought.

I just did some actual number crunching and came up with the bottom line difference between buying outright with ZERO down and a 0% interest loan from GMAC for 5 years with $1,000 towards the car in incentives. Or, a three year smartbuy with ZERO down, 4.5% interest and a 60% residual, 12k miles a year and $2,250 in incentives. The car is a 2005 Rendezvous with a MSRP of $39,900 and the residual is calculated on $40,900. I took off the $1,250 in GM card bonus earnings and $355 in card earnings in my calculation. Sales tax is 8.75% by me, and the dealer is selling the car to me for $35,978 which is $200 over tissue.

If I were to smartbuy the car my monthly payments would be $421.82 a month.
If I were to outright buy the car my monthly payments would be $620.15 a month.

At the end of three years (35 payments) I will have paid a total of $14,763.81 if I were to smartbuy the car. My residual or trade in would be set at $24,540 from day one.

At the end of three years (35 payments) I will have paid a total of $21,705.09 if I were to outright buy the car. What I owe doesn’t make a difference because I paid more over the 35 months. For info sake I would owe $14,883.49. So far I paid $6,941.28 more for the outright buy.

Now it is three years later and I want another car. I walk into the dealer with my smartbuy and am given the $24,540 I owe GMAC on my smartbuy car for the car. Plus I get $2,147.25 in sales tax already paid on the residual applied to my new car.

Now it is three years later and I want another car. I walk into the dealer with my outright buy car and I need to get $14,883.49 on trade so as not to owe anything. Add the $6,941.28 extra I paid for the outright buy in higher payments, and I need to get $21,824.77 on my trade to have laid out the same amount of money as if I had done a smartbuy.

Do you think I get on a trade in $21,824.77 for a three year old Rendezvous with a MSRP of $39,900 with 36k miles on it? Sales tax by me is 8.75%. If I were to sell the car privately I would have to get $23,570.75 plus the costs to sell and insure the car while selling it.


Remember with a smartbuy if the car is stolen or totaled I just have to pay my deductible and walk away because of gap insurance. If the car is purchased outright, I am at the mercy of a dingbat insurance adjuster and have to fight to get what I think the car is worth.

I do not work for a car dealer, and am not in the automotive industry. I crunched these numbers for my personal use and am sharing them with you for information purposes only. Enjoy.


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## QS05GTO (May 9, 2005)

I dont know how the smartbuy works but does this mean that you HAVE to purchase another GM product under the smartbuy plan, or can you just walk away from the lease at the end of 36 months? If you are required to purchase another GM product, how do you quantify that provision?


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## GTODEALER (Jan 7, 2005)

QS05GTO said:


> I dont know how the smartbuy works but does this mean that you HAVE to purchase another GM product under the smartbuy plan, or can you just walk away from the lease at the end of 36 months? If you are required to purchase another GM product, how do you quantify that provision?


You walk away if you want.....


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## QS05GTO (May 9, 2005)

GTODEALER said:


> You walk away if you want.....


So it's a regular lease? I dont understand why they call it smartbuy? I would have thought there was some kind of a difference which allowed them to offer the smartbuy at a lower rate than a regular lease; if it is indeed lower than a traditional lease transaction.


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## Tom (Nov 1, 2004)

In new york gm doesnt lease anymore. with a lease the title stays with gm, with a smartbuy the title passes to the purchase. in ny the owner of a vehicle is ultimately responsible for damage the driver does.

a smartbuy is like a lease only there is no bank fee, there may be a disposition fee of $250, and the buyer pays sales tax on the whole purchase instead of just the portion used. in the example above i would have paid tax on the 24k residual. so if i "traded it in" i would really be walking away from the car, but if i got another gm car, the sales tax on the 24k would be applied to the new car.

because of the extra hit with the sales tax, they seem to be massaging the numbers so the two deals come out the same.


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## TexasAggie (Mar 2, 2005)

If you can always justify a car payment and never own anything, then your scenario works with the SB. But, take another two years and the car is yours with clear title. Also, as you continue to buy cars under a lease, payments will always rise with the price of the car in addition to the Capital Cost Reduction, which is nothing more than throwing money away to reduce the payments.


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## Tom (Nov 1, 2004)

MoreMoonShine said:


> If you can always justify a car payment and never own anything, then your scenario works with the SB. But, take another two years and the car is yours with clear title. Also, as you continue to buy cars under a lease, payments will always rise with the price of the car in addition to the Capital Cost Reduction, which is nothing more than throwing money away to reduce the payments.


Re read what I posted. Re read the numbers. If you can justify paying 200 a month more for the same car, and being upside down after three years, etc. What is the car worth after five years? Cars depreciate, cars require more maintenance as they get older. The best years of a car are when it us under warranty. Factor the risk of an accident etc into your equation. You can spend your money as you wish, I just wanted to dispel some myths.

Remember the incentives, GM is giving 4500 if you pay cash, 1000 if you finance at 0%, 2250 if you smartbuy. Good luck with whatever you do.


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## GTODEALER (Jan 7, 2005)

QS05GTO said:


> So it's a regular lease? I dont understand why they call it smartbuy? I would have thought there was some kind of a difference which allowed them to offer the smartbuy at a lower rate than a regular lease; if it is indeed lower than a traditional lease transaction.


It's just wording, marketing etc., it's a lease.... :cheers


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## QS05GTO (May 9, 2005)

It seems worse than a lease from what I can understand, with the exception that IF you decide to trade it in for another GM vehicle, you are promised a predetermined trade in value (which it seems is higher than what the market would allow). I think the only way to come out ahead on the deal would be if you take advantage of the trade in allowance for another GM product.

What happens if you decide to trade the car in for another make; say a Ford. Then say you are offered a lower trade in value than what is allowed in the Smartbuy contract (most likely). So you can either take a negative equity hit if it is less than the sales tax effect OR just turn the car back into GM and lose the sales tax you've paid on the car up front.

I dont know, unless Im not understanding something correctly, it doesnt make too much sense to go this route unless there are circumstances which necessitate it; such as the post about GM not doing leases in ny. :confused


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## jontyrees (Dec 21, 2004)

If you plan on replacing with a new car in 2-4yrs time, and you will be financing that one, you're better off leasing/Smartbuying. If you can pay cash, you may be better off doing that, depending on what other debt you are carrying at what rate. If you plan on keeping the car for a long time, you're probably better off buying it.

All rules of thumb - nobody's situation is exactly the same.

One exception to this I can think of is where some folks were getting $7500 rebates plus a further $5000 in GM Card cash on '04s, before GM lowered the residuals - on a two year Smartbuy, the rebates just about covered the first two years projected depreciation. Basically a free two year rental.


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## Tom (Nov 1, 2004)

QS05GTO said:


> It seems worse than a lease from what I can understand, with the exception that IF you decide to trade it in for another GM vehicle, you are promised a predetermined trade in value (which it seems is higher than what the market would allow). I think the only way to come out ahead on the deal would be if you take advantage of the trade in allowance for another GM product.


A dozen years ago my buddy did a smartbuy on a blazer because the interest was a point lower and the residual a point higher. with a lease they often charge a bank fee up front, etc. 

Acura charges a 1000 or 1100 bank fee to lease. It used to be 500. I paid 1600 in sales tax on my GTO residual that would be lost unless i trade for another gm or keep the car. Like dealer said, same thing different name. 

What i wanted to show was that leasing or smartbuying two cars can come out to about the same thing as buying one car, and honestly, what is a six year old car worth.


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## TulsaGTO (Oct 3, 2004)

I smartbuy because I trade cars every 3 years. At the end of every 3 years, I can trade in if they give me more than the residual, or walk away. I am never upside down on a car. I do not have to buy another GM product at the end of the lease, I can pay $250 and walk away. Smartbuy is great if you like new cars often, which I do. :willy:


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## QS05GTO (May 9, 2005)

TulsaGTO said:


> I smartbuy because I trade cars every 3 years. At the end of every 3 years, I can trade in if they give me more than the residual, or walk away. I am never upside down on a car. I do not have to buy another GM product at the end of the lease, I can pay $250 and walk away. Smartbuy is great if you like new cars often, which I do. :willy:


You can do that with a regular lease as well, but you wouldnt have paid the sales tax on the portion you're giving back to GM.

But generally, a lease locks you in more firmly than a purchase for the term of the contract. On a purchase, you can decide to get rid of it anytime you want. For a lease, even if you get someone to assume your lease, you're usually liable in the event of a default by that individual.


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