BMW Select and Down Payments

fsujmt · 07-29-2021, 11:55 AM

In the process of working up a x45e build.

Looking at traditional financing vs. BMW Select. I know there's a balloon payment after 5 years for Select. Not planning to put crazy mileage on it now that we've moved to the city, so running up the mileage shouldn't be an issue. I'm having a major brain block around all this.

Are there downsides to putting a big chunk of money down when using BMW Select? Any other downsides with using select?

moodyhank82 · 07-29-2021, 01:55 PM

BMW Select is not a lease so there is no mileage allotment like a lease and since it is not a lease, there is no risk in putting money down as in case the asset (i.e the car) is lost, the insurance company will pay you as the owner of the asset...

schlept · 07-29-2021, 02:47 PM

The balloon itself is an interest-only loan of a chunk of the vehicle's MSRP value. It helps you lower your monthly payments when you purchase...at a cost.

To figure out the balloon "tax" each month, just multiply the balloon amount by the monthly interest rate, e.g., [balloon_amt]*(0.9%/12). The BMW calculator folds the balloon interest into the monthly payment for the Select option.

The obvious downside for Select is the lump sum you need to pay or refinance at the end of the term. If you need to refi you will probably have to do so at a higher (used car) interest rate. You could potentially be making payments on your car for a decade if you're not careful!

OTOH, if you get to the end of the term and you don't love the car anymore you run the risk of being upside-down on a trade. This probably won't happen since the balloon should not exceed the residual value, but if the car has been in an accident or has not been well maintained, you could take a hit.

I'd say the balloon is best if you know you want to buy the car, will most likely keep it for a while, and have the cash to pay for it, but you just want to hold off on writing a big check. As long as the interest rate on the balloon is reasonable, there is a good chance you can out-earn the money you're paying on the balloon part of the loan.

Also, if you're looking at balloon financing and the idea of a big balloon payment doesn't bug you, also look at shorter terms (e.g., 36 months). The monthly payment may stay nearly the same (while the balloon payment gets larger).

07-29-2021, 11:55 AM	#1
fsujmt New Member 7 Rep 25 Posts Drives: F15 xDrive35i Join Date: Aug 2018 Location: Tampa iTrader: (0)	BMW Select and Down Payments In the process of working up a x45e build. Looking at traditional financing vs. BMW Select. I know there's a balloon payment after 5 years for Select. Not planning to put crazy mileage on it now that we've moved to the city, so running up the mileage shouldn't be an issue. I'm having a major brain block around all this. Are there downsides to putting a big chunk of money down when using BMW Select? Any other downsides with using select?
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07-29-2021, 01:55 PM	#2
moodyhank82 Lieutenant 588 Rep 502 Posts Drives: G05 45e & G87 6MT Join Date: Aug 2020 Location: CO iTrader: (0)	BMW Select is not a lease so there is no mileage allotment like a lease and since it is not a lease, there is no risk in putting money down as in case the asset (i.e the car) is lost, the insurance company will pay you as the owner of the asset... __________________ BMW CCA Member ID: 592739
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07-29-2021, 02:47 PM	#3
schlept New Member 2 Rep 8 Posts Drives: Subaru Outback, Ford F-150 Join Date: Jun 2021 Location: San Jose, CA iTrader: (0)	The balloon itself is an interest-only loan of a chunk of the vehicle's MSRP value. It helps you lower your monthly payments when you purchase...at a cost. To figure out the balloon "tax" each month, just multiply the balloon amount by the monthly interest rate, e.g., [balloon_amt]*(0.9%/12). The BMW calculator folds the balloon interest into the monthly payment for the Select option. The obvious downside for Select is the lump sum you need to pay or refinance at the end of the term. If you need to refi you will probably have to do so at a higher (used car) interest rate. You could potentially be making payments on your car for a decade if you're not careful! OTOH, if you get to the end of the term and you don't love the car anymore you run the risk of being upside-down on a trade. This probably won't happen since the balloon should not exceed the residual value, but if the car has been in an accident or has not been well maintained, you could take a hit. I'd say the balloon is best if you know you want to buy the car, will most likely keep it for a while, and have the cash to pay for it, but you just want to hold off on writing a big check. As long as the interest rate on the balloon is reasonable, there is a good chance you can out-earn the money you're paying on the balloon part of the loan. Also, if you're looking at balloon financing and the idea of a big balloon payment doesn't bug you, also look at shorter terms (e.g., 36 months). The monthly payment may stay nearly the same (while the balloon payment gets larger).
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