KzooVette

I know this topic has beaten to death (I did quite a bit of searching) but in light of the falterin C5 economy - what is the best plan and why?

I hear a lot of talk of low monthly payments and high residuals - but most leases become less valuable as the residuals drop. That certainly seems to be happening. Right now - a good used C5 seems like a better deal.

Personally, I still think a new car is the best bet if you have the dough to burn and plan to hold on to the car. But with a first Vette purchase (like I am looking at now) does the lease alternative pay divedends? Is it worth leasing a used vehicle?

Dealers . . . lessees . . . brokers - tell me your thoughts. Would those of you leasing ever do it again? Would those outright owners now consider leasing, since you have seen what has happened to the market?


[Modified by KzooGTX, 8:54 PM 4/20/2003]

Estlupum

Right now, 0% financing on a purchase is going to be hard to beat. Understand that leasing or a balloon note purchase is just a different financing structure. With a lease you're financing the difference between the negotiated purchase price plus tax,ect less downpayment and a residual value. This is why the typical lease or "smart buy" payment is so much less than a regular purchase- because you are amortizing a smaller principal amount. Right now, new C5 residuals are low--about 53% on a three year, 15K mile per year deal. Also, the interest rate in a lease is going to be much higher than 0%. I guess the important thing is how long do you expect to keep the car. If you plan on keeping it at the end of the term, it's probably better to go ahead and purchase. You really need to do a cashflow analysis to determine your best course (this is the CPA coming out in me). Remember, try to go balloon note if you can rather than lease because if you wish to buy the car at the end, you'll have to pay sales tax again on the purchase.

At 0% interest, you could finance $36,000 for 60 months @ $600. Don't tell the salesman what you want your note to be. They'll use this information to attempt to make you lose sight of the sale price, interest rate and trade. Bottom line, I'd purchase now unless I could only afford a lower note. If you need help with a cashflow calc, let me know.

SDLong329

<< Remember, try to go balloon note if you can rather than lease because if you wish to buy the car at the end, you'll have to pay sales tax again on the purchase. >>

---While I agree with much of the above ... I think the quoted portion needs clarification. When leasing ... you only pay sales tax on your monthly payment ... not on the total price of the vehicle. If/when you buy out the car at the end of the lease, you would naturally have to pay sales tax on the amount that you pay when you physically purchase the car. You are not paying the same tax twice ... but rather ... paying the same tax in a different method. If you walk away from the car ... you do not have to pay additional taxes on that car.

Estlupum

Yes, you're right. Also, I believe for leases you have to carry 100-300-100 insurance as a minimum which might also be an additional cost for some people.

KzooVette

Definitely good advice . . . I am still struggling with whole notion of leasing a NON-daily driver, I guess. I like the idea of a lower monthly payment - but am skeptical about a leaseed vehicle or baloon payment in my garage queen.

When I was in graduate school, I leased both my Nissan Maxima and my wifes Toyota Tacoma - I really needed the room in the monthly payment department - but I also knew once I graduated I would be in a much better place to purchase both cars outright - which was the goal from the beginning.

But when looking at C5 leases - all of the programs seem extrordinarily one sided - with high monthly payments AND high residuals. I guess I was thinking that if residuals were dropping - a C5 lease might make more sense. With my wife home now (new baby) that $700 payment seems more unrealistic now.

A used C5 avoids teh depreciation factor - but has the onus of uncertainty . . . decisions decisions! :banghead:

ixlr8

You just have to decide what is best for you if I were you and I was going to balloon the car I would definitely give it back at the end of the period you balloon it for. The reason usually the balloon at the end is way more than the car's actual value. It is a con to get you to buy the car at the end. Dumb give it back and let the finance company deal with selling the car. Then you could get a new Vette and think about this the new C6 is just around the corner and you could balloon this Vette and then buy the next one, just a thought. 0% is a good deal but it really is a good deal if you intend on keeping the car 5 years. Also if you want to lease or smartbuy a used Vette you can do that, I would not advise doing it on anything older than 01 cause the residuals really drop off but the residuals are really strong 01 and up.

Estlupum

Quote: I guess I was thinking that if residuals were dropping - a C5 lease might make more sense
_________________

If the residuals are dropping, the lease option is worse. You are having to pay more principal off during the finance period.

As for the non-lease, balloon note option, it has several values over a lease:

1. You can buy the car through refinancing and it is not a taxable transaction because you already own the car.
2. If you maintain it well you can sell it for more than the balloon note and make a profit.
3. Because you own the car, it can be used as a trade.

The drawback is that you usually have to pay a 100 basis point interest rate differential.

KzooVette

SO true . . .

I think I will just plan on a purchase of a used C5 and see what my options are in a few years. No better time to BUY any car than right now - with these low interest rates.

Anyone else with input?

KzooVette

Very interesting. So just so I can get this through my thick skull (there is a reason I practice medicine and not business :_dupe: ) lets use the example of a 2001 C5 for $35,000.

I can look at a 60 month payment at 4.69% (through peoplefirst as of today) with a monthly of $655. That is about the MAX monthly I would want - allowing my wife to stay at home at not work at all.

How would my options change with a balloon note on the same car? And who would I need to talk to get financing info? I have A+ credit (greater than 700) but am leary of walking into a purchase situation without knowing as much as possible - feel free to privately E-mail me if you prefer.

And thanks again, everyone.

Estlupum

I'm not sure what the availability of ballon note financing is on used vettes. Someone else reply if you know. With regard to the comparison:

Option #1:

Purchase Price $35,000
Add Tax & Title ????
Total Price

Less Dwn Pmt ( )
Amount Financed $35,000

5 years @ 4.69% $655 month

Assume 50% residual--value of car when paid for is about $17,500. So, at the end, you own an asset valued at $17,500.

Option #2 Balloon Note:

Same assumptions as above. However, you will finance the difference between the total purchase price (less dwn pmt) less the residual. If this case, you would be financing roughly $17500 plus tax instead of $35,000 plus tax. However, the interest rate will probably be alittle higher...let's say 6%. Your monthly note would be $426 (Remember, you're paying INTEREST on the entire amount financed--the note is lower because you're paying back less in pricipal). At the end of the period, you'd owe $17,500. So, you've paid a lower note, but you don't have the $17,500 value car at the end that you own. At this point, if you can sell the car for more than $17,500, you can do so and pocket the cash. You can also trade in the vehicle (you'd negotiate the trade value as if the balloon note didn't exist) or you can "put" it back to the financing company if you no longer want the car or don't feel its worth the residual. If you get a used car balloon arrangement, make sure the contract has the put feature. Also, realize that the residual amount will vary depending upon various milegae options you select. If you need some more help deciding, let me know.

KzooVette

THANKS!!

You know, my friend and neighbor is the CFO for one of the larger auto groups in the area. He suggested a balloon payment intially - but I was a bit hesitant. I have always thought straight financing made more sense. Maybe I should go back and talk to him some more - as it seems like it might work well, depending on residual amounts. I will definitely talk to you more in the future, if you don't mind!! I can't say for sure that the first Corvette I buy will be the ONLY one - so I like the idea of having a few extra options - even at the cost of a bit more dough out of pocket in the long haul.

Thanks again!!

Estlupum

Ask your friend if he can run you a spreadsheet with two columns. One the regular financing option and the other the balloon notes. Then you can run some sensitivity analyses on the variables. The should make things clearer. The two finance options are really different cash flow structures. You have to decide which is better for you. Also, have you considered buying a new one @ 0%. This might be an attractive alternative as it might not be much more expensive.