Stupid Question: How does GMAC Smart Buy Work?

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Thread: Stupid Question: How does GMAC Smart Buy Work?

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    GMI Staff Member Premium Member nadepalma's Avatar
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    Stupid Question: How does GMAC Smart Buy Work?

    I was just wondering if someone could tell me how these two programs work. I recently saw a GMAC Smart Buy for a Cobalt that was listed as $100 a month -- obviously I know there is some fine print, but was wondering if anyone could tell me what the basic jist is behind a Smart Buy?

    From what someone explained to me (but I question the source as he was never reliable in giving me good information in the past) you can purchase a GM vehicle, and they'll charge you X amount of dollars a month - but it is actually a cheaper monthly payment than a traditional purchase with amortization over a set amount of time. At the end of a specific time frame, you basically have to purchase the car outright or convert to a traditional purchase loan (sounds like a balloon on a mortgage). OR someone said you can "trade the car in" and use it as a down-payment toward another GM vehicle. I'm not so sure about that last part, but I do know a girl I went to high school with who trades in her Chevy for a new Chevy every two years -- and she swears she makes out on the deal (she's not too bright so I'm not taking her word at face value either! )

    I also know there is a "Smart Lease" program, but I'm not sure how that works either...its probably a very different premise, no?

    Okay, thanks fellas. I'm a bit ignorant when it comes to these things, and was looking for some direction. My car is getting up in miles and I'd like to possibly look at something newer in the months ahead and wanted some advice.

    Okay, sorry for the
    "La vita è come un albero di Natale..c'è sempre qualcuno che ti rompe le palle!"

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    Re: Stupid Question: How does GMAC Smart Buy Work?

    basic's of the smartbuy/smartlease, you have a set number of months that you finance 24,36, or possibly 48 months and you also have a pre-set amount of miles that you can put on the vehicle without penalty on your term, normally the standard miles per year is 15k, as long as you keep the vehicle for the length of term that you have selected and you keep the miles at or below the predetermined miles there is not penalty at turn in time, if all terms are kept until the end, you basically have 3 options at the end,1) turn the vehicle back to gmac and pay a $250 disposal fee and you can walk away.2)you can trade the vehicle in if you have equity in it, otherwise whats the use of trading.3) you can turn around and refinance the predetermined balloon payment, if you do that you might as well have bought it to begin with. if you go over your mileage there is a .20 per mile penalty at turn in time, thats where most people get into a bind on the smartbuy/smartlease, they think that they will be driving 45k miles and then they drive 90k, thats a pretty hefty penalty, the only real difference between the smartbuy/vs smartlease, most all of the tems are about the same although there is less out of pocket cash due at sign up with the smartbuy/vs smartlease, on a true smartlease you make your first payment, security deposit, pay for tag and excise taxes at delivery and on the smartbuy you make your first payment in the normal 30day after delivery, for someone that likes to trade every 24-48 months, it gives you the option of not having to worry about trade value and you can normally get in a bit nicer vehicle than a conventional purchase with conventional financing will allow, as long as you know what your getting into with the smartbuy/smartlease its not a bad deal, but beware if your driving excess mileage, thats what will normally get to you
    Last edited by redlipp; 02-27-2006 at 11:22 AM.

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    7.0 Liter LS7 V8 desmo9's Avatar
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    Re: Stupid Question: How does GMAC Smart Buy Work?

    The key difference between Smart Buy vs Smart Lease regards who "owns" the car (holds the title). In states like New York, there's a law on the book that the title holder bears liability for an accident. Therefore, with leases in NY, when Joe Blow crashed his Buick into Aunt Polly's pumpernickel patch, GM could be held responsible for lost pumpernickle, pain and suffering. So in NY, OEMs stopped doing leases, but needed something marketable in its place. Programs like Smart Buy offer consumers much of what a lease is, but with a key caveat.

    Smart Buy works just like a lease, in that you only pay the depreciation plus interest, and have an option of buying at the residual at the end of the term. However, in Smart Lease (or any lease) you only pay sales taxes on the depreciated amount (tax on your monthly payment). In a Smart Buy, you own it, so you pay sales tax on the whole thing. It's a big difference.

    Suppose the car's transaction price is $30K with a residual value of $20K after a 24-month contract. At a 5% interest rate and 8% sales tax rate, here's the difference:

    Smart Lease:

    Depreciation: $10000
    Interest: $2500
    Sales Tax: $800 (only on the $10K)

    Total outlay: $13300 over 24 months = $554/mo

    Smart Buy:

    Depreciation: $10000
    Interest: $2500
    Sales Tax: $2400 (on the $30K price)

    Total outlay: $14900 over 24 months = $620/mo


    Smart Buy is NOT a good idea if a Smart Lease is available with the same purchase price and financing terms. In the above example the Buy increased the monthly payment by almost $70.
    Last edited by desmo9; 02-27-2006 at 11:32 AM.

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    Dumber Question: Lease Pull Aheads

    This is an even dumber question: how does the lease pull ahead work? What do they do if there is excess mileage and they are offering a pull ahead?

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