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Anyone have any insight into getting out of a "Smart Lease"


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I am curious about what is involved with getting out of a "Smart Lease." It is one of those finances where you finance half the car over X months and at the end their is a balloon payment due and the option to pay the balloon payment or to turn the car over to the dealer.

Are their penalties? What is involved?

 

- Mike

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I forgot the details but I'm actually taking a personal finance class right now and all I remember is that the smart-leases are not worth it at all. Something having to do with paying more interest tha you need to (compared to other options) and having your principal remain untouched for a longer period of time.

 

I would review all the fine print.

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Bessie II's Thread

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Mike,

 

It's a SmartBuy, not a SmartLease.

 

How long have you been in it? Interest is paid on the balloon amount for the entire term, because the balloon is outstanding for the entire term. OTOH, a lot of SmartBuys are at low rates. The whole idea is to be at net equity of zero at the maturation of the balloon amount, so you'll be upside down until then, and GM cars depreciate pretty fast in the first two years especially.

 

So, call GMAC and ask for your payoff: 800-200-4622. If you're selling the car, subtract what the car is worth from the payoff amount, and that's the check you have to write; or keep the car, and write the check.

 

 

Tom

FRA-GEE-LAY... It must be Italian!
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Mike,

 

It's a SmartBuy, not a SmartLease.

 

How long have you been in it? Interest is paid on the balloon amount for the entire term, because the balloon is outstanding for the entire term. OTOH, a lot of SmartBuys are at low rates. The whole idea is to be at net equity of zero at the maturation of the balloon amount, so you'll be upside down until then, and GM cars depreciate pretty fast in the first two years especially.

 

So, call GMAC and ask for your payoff: 800-200-4622. If you're selling the car, subtract what the car is worth from the payoff amount, and that's the check you have to write; or keep the car, and write the check.

 

 

Tom

 

Thanks for the info.

 

I've been in it for 7 months now and have 3500 miles.

 

- Mike

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Mike,

 

It's a SmartBuy, not a SmartLease.

 

How long have you been in it? Interest is paid on the balloon amount for the entire term, because the balloon is outstanding for the entire term. OTOH, a lot of SmartBuys are at low rates. The whole idea is to be at net equity of zero at the maturation of the balloon amount, so you'll be upside down until then, and GM cars depreciate pretty fast in the first two years especially.

 

So, call GMAC and ask for your payoff: 800-200-4622. If you're selling the car, subtract what the car is worth from the payoff amount, and that's the check you have to write; or keep the car, and write the check.

 

 

Tom

 

GMAC has nothing to do with this...has has the LGT. I think he is asking how to get out of his smart lease on the LGT. It most likely can be done, but i bet you will get stuck having to pay at least a couple grand to do it.

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As far as I understand, the SmartLease is no different than standard financing with the exception of the balloon payment. That being the case, getting out of it amounts to selling it. If you sell it for more than you owe, you a make a profit. If you sell it for less, than you take a loss.

 

The dealer may work with you on a deal but 9 times out of 10, you're better off selling it privately.

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D-2.5-GT,

 

"Smart Products" is the branded name of the GMAC financing products. I figured he was referring to a different vehicle. That's why I gave the GMAC specific phone number.

 

He is in New York; due to vicarious liability laws, there is no leasing in New York. It is conventional financing with a balloon payment. "Smart Lease" is a true lease, with an option to buy for the residual; "Smart Buy" is a finance with a balloon, and the option to treat it like a lease at balloon maturity. If you are referring to the Subaru Motors Finance versions, just say, "lease" and "balloon note", to differentiate them from the GMAC brand name products.

 

Regardless, the answer is to call the lessor/lienholder and ask how much the buyout is. GMAC and SMF calculate the amount due on the leases differently from each other; I'm not at work, so I don't have the contracts in front of me. The payoff on the balloon notes fall under Reg Z's definitions for "simple interest", "actuarial", or "rule of 78s" (shudder), depending on how the contract is defined in the fine print. Again, I don't have the contracts in front of me, but I'm pretty sure there are no penalties over and above the payment of outstanding principal. On the GMAC specific Smart Buy, there is a fee of $275 (I think) if you choose to turn the vehicle back in rather than pay or refinance the balloon. In PA, we do very little Smart Buy. I'd have to order the paperwork and read the manual if someone demanded a Smart Buy. The Smart Lease almost always works out better, both for us and the customers.

 

A lot of the information is state-specific; I'm in PA. Fees can vary from state to state. Terminology can vary from state to state. GMAC might very well be calling the conventional-financing-with-balloon a Smart Lease in New York; dealerships might be calling all leasing and balloon financing "Smart Lease" regardless of whom the lessor/lienholder might be.

 

I've been doing this for almost 20 years, but I'm not always right; if you see something I wrote that is wrong, call me on it. I'd rather be corrected and see the right information out there.

 

 

Tom

FRA-GEE-LAY... It must be Italian!
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Mosca, you are correct - the dealer called it a "Smart Buy." Sorry for the confusion. If I had a guess, it'd be next to impossible to get out of it without taking an awful loss. Even if I was ordering another car and trading. I might as well just add to mine as I please - as long as it makes the value of the car increase.

 

- Mike

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You wouldn't get "screwed", but it would definitely hurt. The car has depreciated faster than you've payed it back so far. So, you BOUGHT a new car, but now you're SELLING a used car. Your obligation is to complete the payment of the agreed upon price, and the cost of borrowing whatever funds you used at the time of purchase for however long you had the loan open.

 

The part that screws you is that you bought a new car rather than one that has already depreciated somewhat. I myself try to buy a one or two year old car and put the extended service contract on it to make up for the lost warranty. I leased this car because I drove it and wanted it (hey, we're human and susceptible to that stuff, too).

 

 

Tom

FRA-GEE-LAY... It must be Italian!
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YOu can LEASE in NY but it usually costs an extra hundred bucks a month. Many manufacturers won't do it anymore here but you can still lease if it is offered. It's due to the fact that if you are in an accident the manufacturer is responsible whereas most states it's the driver. That is what drives up the cost of a lease here.
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