bmw select?

[mkiiieustyle]

i just tried to price out what a 35k 3 series would be just to get an idea of what i'm going to be paying when i buy the 1 series. they had an option of BMW select between the other 2 of bmw performance loan and traditional loan. what is BMW select can anyone enlighten me?:redface:

[Tsion]

pretty sure that it is a balloon loan. They don't like to call it that but basically you finance X amount so you have a smaller monthly and I believe at a certain point into the loan a larger portion is due.

[Tsion]

just out of curiosity what was the diff. prices you got and what terms did you use? I haven't had time to play with it.

[TESLAASTRO]

anyone have details of this?....terms?.....

[atr_hugo]

Check here:

http://fs.bmwusa.com/BmwFsPulp/

From that site:

Just make low monthly payments for a time period that you establish up front. At the end of the term, a balloon payment is due. You can choose to refinance the balloon payment amount with BMW Financial Services or complete your purchase with the one final payment. Choose from flexible terms similar to a lease.

[Tsion]

Finance prefer to use this when people get price shock because it can drop your montly a lot. But be prepared that you will need to cut a check one day. I mean you still have to pay for the car one way or another.

[TESLAASTRO]

I wonder if the BMW Select option offers the same finance % as a traditional loan.....I think this option is a good one......

[mkiiieustyle]

well based on a 24month term loan at 6.99% with no money down or trade-in both the traditional and performance loans were asking 1600 a month. which is pretty steep since i got a mortgae that i'm paying for myself, the select program offered 600 per month, which is a hell of alot cheaper but at that point i didn't have a clue what it actually was, guess it really could be a good thing in the long run.

[larryn]

Originally Posted by mkiiieustyle

well based on a 24month term loan at 6.99% with no money down or trade-in both the traditional and performance loans were asking 1600 a month. which is pretty steep since i got a mortgae that i'm paying for myself, the select program offered 600 per month, which is a hell of alot cheaper but at that point i didn't have a clue what it actually was, guess it really could be a good thing in the long run.

Unless you are prepared to make that balloon payment at the end of the term, I would not suggest it. Even if you finance that balloon payment, then you're basically taking out a very long loan on the car, along with all of the interest payments.

One thing to consider is a home equity loan where the interest is tax deductible. You will likely get a fairly favorable rate as well. Just make sure you pay the thing off in a reasonable amount of time. I know people who've taken out small 2nd mortgages to purchase a car and to deduct the interest, then made minimum payments on the loan, dragging it waaaay out.

[mkiiieustyle]

yeah i just changed the number around a little and it's not that bad, a 48 month loan (4yrs) @6.99% with 2500 down will be on both the performance and the traditional loan around 690 per month which is what i was thinking it was going to be, i changed the select loan to 48 months also and it dropped maybe 100 bucks too 570 per month so in the long run if you want a lower payment then i would just extend your payment schedule.

[mkiiieustyle]

yeah i JUST moved into my home in august, i have a small amount of equity in the home i have, and i would like too keep in there to be honest, i'm the type of person who HATES loans etc but will get one if needed i like to pay on something and pay it off,

[Tsion]

Yea but on a 2yr finance thats pretty intense, most people opt to go 4yrs min. I have no idea whether I'm going to lease or finance yet. It depends on the payment. I would love to lease but it all depends on the financial viability of either side. Its rare that someone would finance for 2 yrs w/ zero down. And remember if you can get a loan through your bank for a lower rate you can go with that.

Example: I get a 3% rate on all auto loans through my bank vs. 7% with BMW Financial. Obviously I am gonna finance with my bank.

[Tsion]

Originally Posted by mkiiieustyle

yeah i just changed the number around a little and it's not that bad, a 48 month loan (4yrs) @6.99% with 2500 down will be on both the performance and the traditional loan around 690 per month which is what i was thinking it was going to be, i changed the select loan to 48 months also and it dropped maybe 100 bucks too 570 per month so in the long run if you want a lower payment then i would just extend your payment schedule.

Sounds great!

[Nixon]

with the traditional loan, you own the car at the end of the term.

With the BMW Select balloon loan, you basically hope you owe less money than the car is worth at the end of the term. That way you would be in a better position then leasing for the same length of term. In the end the balloon loan can be more similar to a lease than a traditional loan, depending upon what you do when the balloon loan comes due.

1) You can sell the car, turn over the money to the finance company to pay off the balloon loan balance, and walk away with nothing. Actually, if you sell the car for more than the balance, you might walk away with some cash in your back pocket. On the other hand, you might end up being upside down in the loan and owe more for the balloon payment then you can sell the car for. Then you would have to kick in more of your own cash to the finance company in order to sell the car.

2) Keep the car and get a new loan on it. What you are talking about there is really a 4 or more year loan. If you do the first loan for 24 months, then a second loan for another 24 months, why not just do a 48 month loan in the first place?

Some people are optimists and the think they will just pay off the balloon loan with cash at the end. But really, if all that cash was pouring in enough to save to pay it off all at once, why wouldn't somebody be able to afford to make the higher payments each month in the first place? Unless you know somebody with a bunch of cash that is on life support and has you in their will, don't bet on being able to pay off the entire lump sum when the balloon loan comes due. Plan on having to get another loan or selling the car.

Sadly, I think what really happens with the majority of these balloon loans is that people take the 60-month balloon loan option because it is the cheapest and they don't want to lease. Then they take another 48 or 60-month loan when the balloon loan is due because they can't afford any larger payments then they could when they set up the balloon loan in the first place. That makes it a 9-10 year loan.... ugh. It is almost impossible to keep from getting upside down at some point in this long of a loan.



All of this is somewhat similar to a lease.

1) In both cases you do not have full ownership of the vehicle at the end of the term.
2) In both cases you can end up owing a ton of money at the end of the term just to walk away without a car. (damage and mileage charges for the lease, and being upside down in the balloon loan.)
3) If you choose to buy out the lease using a loan, or refinance the balloon payment, what you are really looking at is doubling the term of the loan in both cases. A traditional loan for the longer term may be better.

On the upside for the balloon loan, if you negotiate well, buy smartly, keep it in perfect condition, and don't put too many miles on it, you might (MIGHT!) have a car that you can sell for more than you owe at the end of the term. Big maybe.

On the upside for the lease, if you keep within your allotted miles and don't turn it in with damage, there is no way you can lose money on the car at the end of the term if the resale market tanks for your model. The lease can cap your downside losses for depreciation if you work it right.

Of course there are more complexities like money factors, taxes, loan/lease fees, security deposits, etc...

[atr_hugo]

Nixon - nice explanation. The ballon loan (BMW Select) sounds like a pretty dicey proposition to me, too many things have to line up perfectly at the end of the loan period for it to make a lot of sense to me.

[Nixon]

Originally Posted by atr_hugo

Nixon - nice explanation. The ballon loan (BMW Select) sounds like a pretty dicey proposition to me, too many things have to line up perfectly at the end of the loan period for it to make a lot of sense to me.

Thanks.

I agree, it's too dicey for me too. I would rather buy a lesser car at a lower price than do a BMW Select loan. (a 123d instantly comes to mind...) Although there is one situation where I will use one.

There was some speculation in the M1 threads that there wouldn't be room in the lineup for both a 135i twin-turbo and an M1 with an NA engine. The speculation was that if an M1 came out in 2009 or 2010, that the 135i would be dropped from the lineup.

If that happened, and the 135i turned out to be a big hit, I would use a BMW Select loan to get one if I couldn't get afford a traditional loan. I would ED it on the last possible date I could, then just make sure I kept it in very good shape and kept the mileage down.

The only reason I would do that would be if I thought the 135i would achieve cult status like a Land Rover Defender 90. Clean used Defender 90's sold for more used a few years after they stopped importing them than they cost brand new. Nice ones still sell for more than they cost new, even 10 years later. If the 135i is as nice as we expect it to be, and it was only sold for 2 years or less, it would definitely become a cult car even if the M1 was better.

[TESLAASTRO]

Originally Posted by Tsion

Yea but on a 2yr finance thats pretty intense, most people opt to go 4yrs min. I have no idea whether I'm going to lease or finance yet. It depends on the payment. I would love to lease but it all depends on the financial viability of either side. Its rare that someone would finance for 2 yrs w/ zero down. And remember if you can get a loan through your bank for a lower rate you can go with that.

Example: I get a 3% rate on all auto loans through my bank vs. 7% with BMW Financial. Obviously I am gonna finance with my bank.

W@W, 3%......thats a great rate....is that a promo for bank customers only?.....

[aequitasXI]

As it has been noted already, be careful with balloon loans... They seem more manageable in the beginning, but you better be able to cut the check when the time comes. It seems like a pretty sneaky loan type to me.

[1ster]

As with all things in life, if it sounds too good to be true...