Smart Buy Vs. Purchase @ 0%

locobill1 · March 22, 2008

I just picked up my wifes new 08 LT2 Tahoe. I need some advice on financing. I set this up as a smart buy. I got employee pricing. The MSRP was 43,900. The GMS pricing brought it down to 37,500. I set it up as a smart buy. But I think I have changed my mind. I can finance it at 0% for 60 months. If I buy it I lose 500 in bonus cash that I got on the Smart buy. Here's the numbers:

I'm putting 3k down.

36 month smartbuy 12,000 miles per year:

37,500 financed on the smart buy with GAP is 553.00 per month @ 35 total payments would be $19,355.

60 months @ 0%

38,000 financed on a purchase at 0% at the three year mark at 625 per month would be 22,166 total payments. Smartbuy vs. purchase saves a total of 2,800 dollars in monthly payments over a 3 year period. The problem is that after three years on the purchase I would only owe 15,834. I looked at the trade value for an 05 Tahoe that is comparable and books for 20,000 - 23,000 depending on where you look. If we purchase, assuming at the end of 3 years our new Tahoe had a comparable trade in value we would have over 7,500 in equity which far exceeds the savings on the savings in the monthly payments of 2,800. Is there anything that I'm not considering? Overall it looks to me we would be better off with a purchase. Anywhere from 2,000 to 5,000 better off depending on the actual value at the end of 3 years.

The ballon payment at the end of the smartbuy is 27k. If we purchase the payments are 83 more per month, but we would only owe $15,834. The dealership is really pushing the smartbuy, which by the way is at 9%. Any GM finance guys out there? What do you think?

2004GMC1500CC · March 22, 2008

I just picked up my wifes new 08 LT2 Tahoe. I need some advice on financing. I set this up as a smart buy. I got employee pricing. The MSRP was 43,900. The GMS pricing brought it down to 37,500. I set it up as a smart buy. But I think I have changed my mind. I can finance it at 0% for 60 months. If I buy it I lose 500 in bonus cash that I got on the Smart buy. Here's the numbers:

I'm putting 3k down.

36 month smartbuy 12,000 miles per year:

37,500 financed on the smart buy with GAP is 553.00 per month @ 35 total payments would be $19,355.

60 months @ 0%

38,000 financed on a purchase at 0% at the three year mark at 625 per month would be 22,166 total payments. Smartbuy vs. purchase saves a total of 2,800 dollars in monthly payments over a 3 year period. The problem is that after three years on the purchase I would only owe 15,834. I looked at the trade value for an 05 Tahoe that is comparable and books for 20,000 - 23,000 depending on where you look. If we purchase, assuming at the end of 3 years our new Tahoe had a comparable trade in value we would have over 7,500 in equity which far exceeds the savings on the savings in the monthly payments of 2,800. Is there anything that I'm not considering? Overall it looks to me we would be better off with a purchase. Anywhere from 2,000 to 5,000 better off depending on the actual value at the end of 3 years.

The ballon payment at the end of the smartbuy is 27k. If we purchase the payments are 83 more per month, but we would only owe $15,834. The dealership is really pushing the smartbuy, which by the way is at 9%. Any GM finance guys out there? What do you think?

It really comes down to if you are going to keep it or trade it in in 3 or 4 years. If you keep it, don't smart buy. We did a smart buy on a Grand Prix and it worked out perfect because I wasn't going to keep it. My GMC, we financed it straight because it will be replacing my 91 and be around for a long time.

locobill1 · March 22, 2008

I just picked up my wifes new 08 LT2 Tahoe. I need some advice on financing. I set this up as a smart buy. I got employee pricing. The MSRP was 43,900. The GMS pricing brought it down to 37,500. I set it up as a smart buy. But I think I have changed my mind. I can finance it at 0% for 60 months. If I buy it I lose 500 in bonus cash that I got on the Smart buy. Here's the numbers:

I'm putting 3k down.

36 month smartbuy 12,000 miles per year:

37,500 financed on the smart buy with GAP is 553.00 per month @ 35 total payments would be $19,355.

60 months @ 0%

38,000 financed on a purchase at 0% at the three year mark at 625 per month would be 22,166 total payments. [/size] Smartbuy vs. purchase saves a total of 2,800 dollars in monthly payments over a 3 year period. The problem is that after three years on the purchase I would only owe 15,834. I looked at the trade value for an 05 Tahoe that is comparable and books for 20,000 - 23,000 depending on where you look. If we purchase, assuming at the end of 3 years our new Tahoe had a comparable trade in value we would have over 7,500 in equity which far exceeds the savings on the savings in the monthly payments of 2,800. Is there anything that I'm not considering? Overall it looks to me we would be better off with a purchase. Anywhere from 2,000 to 5,000 better off depending on the actual value at the end of 3 years.

The ballon payment at the end of the smartbuy is 27k. If we purchase the payments are 83 more per month, but we would only owe $15,834. The dealership is really pushing the smartbuy, which by the way is at 9%. Any GM finance guys out there? What do you think?

It really comes down to if you are going to keep it or trade it in in 3 or 4 years. If you keep it, don't smart buy. We did a smart buy on a Grand Prix and it worked out perfect because I wasn't going to keep it. My GMC, we financed it straight because it will be replacing my 91 and be around for a long time.

I plan on keeping it for 3 years, but the math seems to come out better to purchase at 0%.

98 Z71 SLT · March 22, 2008

Who cares what the dealer is pushing...DON'T smart-buy!! The dealer is getting "spiffed" for 1. Selling a smart-buy 2. The 9 percent interest is ridiclous.

Purchase the truck! You won't lose out like you would on a smartbuy!!

Metro12 · March 22, 2008

I bought my truck. I have thought about leasing over the last few purchases I have made. I am by no means, rolling in money, but have found the price for a 60 month loan vs a 36 month lease, makes sense for me to buy. I'm kind of ADHD when it comes to vehicles, and don't often keep a car longer then 2-3 years. So, I have had positive equity in the cars, when I go to sell and buy another new vehicle. I have my truck 07 Silverado CC, a 2007 Dodge Charger R/T, two motorcycles and a 1973 Corvette. I take good care of my vehicles, and don't put a ton of miles on them-again, helping my resale value. Heck, I had a 2004 Trailblazer I sold when I bought my Charger in Jan 07, which had 16k miles when I sold it!!

Sounds like you've done your math, and the numbers make sense to me!!

2004GMC1500CC · March 22, 2008

Who cares what the dealer is pushing...DON'T smart-buy!! The dealer is getting "spiffed" for 1. Selling a smart-buy 2. The 9 percent interest is ridiclous.

Purchase the truck! You won't lose out like you would on a smartbuy!!

Having had a smart buy, I disagree. I looked at trading in my ride after 2.5 years and couldn't do it, to upside down. Sometimes the smart buy does work out, but you have to do the math and be honest with yourself about how long you want it and what kind of payments you can afford.

jwieps · March 23, 2008

I bought my truck. I have thought about leasing over the last few purchases I have made. I am by no means, rolling in money, but have found the price for a 60 month loan vs a 36 month lease, makes sense for me to buy. I'm kind of ADHD when it comes to vehicles, and don't often keep a car longer then 2-3 years. So, I have had positive equity in the cars, when I go to sell and buy another new vehicle. I have my truck 07 Silverado CC, a 2007 Dodge Charger R/T, two motorcycles and a 1973 Corvette. I take good care of my vehicles, and don't put a ton of miles on them-again, helping my resale value. Heck, I had a 2004 Trailblazer I sold when I bought my Charger in Jan 07, which had 16k miles when I sold it!!

Sounds like you've done your math, and the numbers make sense to me!!

Question: When you purchased the TBlazer, how much did you pay for it in total (ex. $32k?); how much would you have saved bt SB'ing the truck for 3 years instead? (16k?, maybe?) I would guess that truck to be worth around

10-12K on trade... I work in the automotive finance world; but you tell me what makes more sense? You may have positive equity, but what was your cost to own over those few years???

Who cares what the dealer is pushing...DON'T smart-buy!! The dealer is getting "spiffed" for 1. Selling a smart-buy 2. The 9 percent interest is ridiclous.

Purchase the truck! You won't lose out like you would on a smartbuy!!

Having had a smart buy, I disagree. I looked at trading in my ride after 2.5 years and couldn't do it, to upside down. Sometimes the smart buy does work out, but you have to do the math and be honest with yourself about how long you want it and what kind of payments you can afford.

SB and lease is nearly the same. Both have rates involved. If you SB (or lease) the vehicle, the only advantage to he dealer is that their retention to you will be greater in three years, cause you'll be looking again.

BTW: My truck Im picking up next week is another Smartbuy; if the residual is 57% or so after 3 years, I dont want to bury myself in a truck either...

SPIFFED for selling a SmartBuy?? Enlighten me on that please.....

Tucson_02Silverado · March 23, 2008

I thought SmartBuy is a hybid of lease and purchase.

You'd have $553 monthly payments for 35 months and a balloon balance of around $18000 on month 36. It wasn't just turn it in at month 36, it was a required payment of $18000.

I also thought that the fine print was that the $18000 would be the contractual defined trade in value if another NEW GM vehicle is purchased. Meaning that you start at $0 towards the new vehicle, which becomes the traditional lease part of SmartBuy. Otherwise, give them $18000 to either keep it or if you want other than a GM vehicle.

It was a way to turn GM vehicle "sales" numbers over every 36 months.

Dana_15 · March 23, 2008

By those numbers, I'd go for the purchase. I think that if you do the Smartbuy and then purchase the vehicle at the end of the term, you get taxed again on the purchase. Between that and the 9% interest you will be paying, you would be losing some cash in the long run.

Did you look into a six or seven year loan? I know it won't be 0%....

SilveradoCJ7 · March 23, 2008

If you dont go over the 36k miles I would buy it. Of course the only factor that I can think of that may hurt you is gas prices. In 3 years they may be really high and no one may wont a large SUV. If you can afford the monthy payment buy it.

jwieps · March 23, 2008

By those numbers, I'd go for the purchase. I think that if you do the Smartbuy and then purchase the vehicle at the end of the term, you get taxed again on the purchase. Between that and the 9% interest you will be paying, you would be losing some cash in the long run.

Did you look into a six or seven year loan? I know it won't be 0%....

Tax on a SmartBuy is paid upfront, unlike a lease so you do not pay twice if you buy it out. This is one of the reasons that when if you are coming out of a SB, you should look into another SB and not a lease, because you will get the tax savings for your matured residual.

If you dont go over the 36k miles I would buy it. Of course the only factor that I can think of that may hurt you is gas prices. In 3 years they may be really high and no one may wont a large SUV. If you can afford the monthy payment buy it.

Gas prices - could really hurt you.... Just another reason not to lock yourself in. If gas went to say $5 gal in 3 years, and you streched your loan to 6 years so that you could afford the payment, you would be so upside down, you might never be able to get out of your gas guzzler.

I still am waiting to find how th dealer gets spiffed for selling SmartBuys.

locobill1 · March 23, 2008

By those numbers, I'd go for the purchase. I think that if you do the Smartbuy and then purchase the vehicle at the end of the term, you get taxed again on the purchase. Between that and the 9% interest you will be paying, you would be losing some cash in the long run.

Did you look into a six or seven year loan? I know it won't be 0%....

Tax on a SmartBuy is paid upfront, unlike a lease so you do not pay twice if you buy it out. This is one of the reasons that when if you are coming out of a SB, you should look into another SB and not a lease, because you will get the tax savings for your matured residual.

If you dont go over the 36k miles I would buy it. Of course the only factor that I can think of that may hurt you is gas prices. In 3 years they may be really high and no one may wont a large SUV. If you can afford the monthy payment buy it.

Gas prices - could really hurt you.... Just another reason not to lock yourself in. If gas went to say $5 gal in 3 years, and you streched your loan to 6 years so that you could afford the payment, you would be so upside down, you might never be able to get out of your gas guzzler.

I still am waiting to find how th dealer gets spiffed for selling SmartBuys.

jwieps, are you saying that the smart buy is the way to go even over a 0% loan for 60 months? The bit x factor is how much the Tahoe will be worth in 3 years.

jwieps · March 23, 2008

By those numbers, I'd go for the purchase. I think that if you do the Smartbuy and then purchase the vehicle at the end of the term, you get taxed again on the purchase. Between that and the 9% interest you will be paying, you would be losing some cash in the long run.

Did you look into a six or seven year loan? I know it won't be 0%....

Tax on a SmartBuy is paid upfront, unlike a lease so you do not pay twice if you buy it out. This is one of the reasons that when if you are coming out of a SB, you should look into another SB and not a lease, because you will get the tax savings for your matured residual.

If you dont go over the 36k miles I would buy it. Of course the only factor that I can think of that may hurt you is gas prices. In 3 years they may be really high and no one may wont a large SUV. If you can afford the monthy payment buy it.

Gas prices - could really hurt you.... Just another reason not to lock yourself in. If gas went to say $5 gal in 3 years, and you streched your loan to 6 years so that you could afford the payment, you would be so upside down, you might never be able to get out of your gas guzzler.

I still am waiting to find how th dealer gets spiffed for selling SmartBuys.

jwieps, are you saying that the smart buy is the way to go even over a 0% loan for 60 months? The bit x factor is how much the Tahoe will be worth in 3 years.

Its a much "safer" way to get the vehicle that you want... and you always will have the option to buy. But thats just my $.02 (and I do this for a living).

Just a side note; 0% isnt all that its made up to be... You have to consider how much in Rebates you are giving up. Example, in order to get the full benefit of 0%, you would have to keep you loan for the maximum term. A Rebate is taken off of the price of the sale, meaning when you pull off the lot, you owe $X,000.00 less on your loan than with the 0%. Most of the customers I have seen with low APR's try to trade in their vehicles after a couple years, didnt take the rebate, owe (ex $3000) more than they could have. This is a major contributor to the "upside down" situation.

locobill1 · March 23, 2008

By those numbers, I'd go for the purchase. I think that if you do the Smartbuy and then purchase the vehicle at the end of the term, you get taxed again on the purchase. Between that and the 9% interest you will be paying, you would be losing some cash in the long run.

Did you look into a six or seven year loan? I know it won't be 0%....

Tax on a SmartBuy is paid upfront, unlike a lease so you do not pay twice if you buy it out. This is one of the reasons that when if you are coming out of a SB, you should look into another SB and not a lease, because you will get the tax savings for your matured residual.

If you dont go over the 36k miles I would buy it. Of course the only factor that I can think of that may hurt you is gas prices. In 3 years they may be really high and no one may wont a large SUV. If you can afford the monthy payment buy it.

Gas prices - could really hurt you.... Just another reason not to lock yourself in. If gas went to say $5 gal in 3 years, and you streched your loan to 6 years so that you could afford the payment, you would be so upside down, you might never be able to get out of your gas guzzler.

I still am waiting to find how th dealer gets spiffed for selling SmartBuys.

jwieps, are you saying that the smart buy is the way to go even over a 0% loan for 60 months? The bit x factor is how much the Tahoe will be worth in 3 years.

Its a much "safer" way to get the vehicle that you want... and you always will have the option to buy. But thats just my $.02 (and I do this for a living).

Just a side note; 0% isnt all that its made up to be... You have to consider how much in Rebates you are giving up. Example, in order to get the full benefit of 0%, you would have to keep you loan for the maximum term. A Rebate is taken off of the price of the sale, meaning when you pull off the lot, you owe $X,000.00 less on your loan than with the 0%. Most of the customers I have seen with low APR's try to trade in their vehicles after a couple years, didnt take the rebate, owe (ex $3000) more than they could have. This is a major contributor to the "upside down" situation.

It sounds like you know your stuff. I'm getting the GMS pricing (almost 7K off) + 0% for 60 months. You still think there's a chance with gas prices going up that would cause me to be upside down in 3 years?

SilveradoCJ7 · March 24, 2008

By those numbers, I'd go for the purchase. I think that if you do the Smartbuy and then purchase the vehicle at the end of the term, you get taxed again on the purchase. Between that and the 9% interest you will be paying, you would be losing some cash in the long run.

Did you look into a six or seven year loan? I know it won't be 0%....

Tax on a SmartBuy is paid upfront, unlike a lease so you do not pay twice if you buy it out. This is one of the reasons that when if you are coming out of a SB, you should look into another SB and not a lease, because you will get the tax savings for your matured residual.

If you dont go over the 36k miles I would buy it. Of course the only factor that I can think of that may hurt you is gas prices. In 3 years they may be really high and no one may wont a large SUV. If you can afford the monthy payment buy it.

Gas prices - could really hurt you.... Just another reason not to lock yourself in. If gas went to say $5 gal in 3 years, and you streched your loan to 6 years so that you could afford the payment, you would be so upside down, you might never be able to get out of your gas guzzler.

I still am waiting to find how th dealer gets spiffed for selling SmartBuys.

jwieps, are you saying that the smart buy is the way to go even over a 0% loan for 60 months? The bit x factor is how much the Tahoe will be worth in 3 years.

Its a much "safer" way to get the vehicle that you want... and you always will have the option to buy. But thats just my $.02 (and I do this for a living).

Just a side note; 0% isnt all that its made up to be... You have to consider how much in Rebates you are giving up. Example, in order to get the full benefit of 0%, you would have to keep you loan for the maximum term. A Rebate is taken off of the price of the sale, meaning when you pull off the lot, you owe $X,000.00 less on your loan than with the 0%. Most of the customers I have seen with low APR's try to trade in their vehicles after a couple years, didnt take the rebate, owe (ex $3000) more than they could have. This is a major contributor to the "upside down" situation.

True, but depending on the rebate usually after 3 years (on a 5 year loan) you owe the same or less (with 0%) then if you took the rebate. Personally I say never go over a 5 year loan. If you have to go over a 5 year loan you probably cant afford the car you are buying. I am trying to do 3 or 4 year on my next ride.