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  #1  
Old 07-07-2009, 01:08 AM
ericas75 ericas75 is offline
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BMW Select - Program Overview

Can someone give me some background on the BMW Select program i.e. pros and cons? One dealer sppent an hour trying to talk me into it while another has casually said it's not a good value but she doesn't have a lot of info to back up that statement.

My understanding is that the program is basically a buying program with some of the advantages of leasing like lower monthly payments. Much of the cost is deferred into the balloon payment which you can choose to pay and buy the car outright or use the equity in the car for a trade-in or sale to a private buyer.

I appreciate any info you can share. It seems like a pretty good deal to me as long as you're putting the savings from monthly payments into a higher yielding investment. I'm not sure whether my current CA is blowing it off out of ignorance or some hidden agenda.
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  #2  
Old 07-07-2009, 08:42 AM
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SARAFIL SARAFIL is offline
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The problem that some people have with the select is that at the end you have equity... only that it is negative.

A select can be a good idea if you go into it knowing what it is.

1. It is a simple interest loan, so you can pre-pay just like a regular loan.

2. The balloon is fixed upfront, but can go down if you pay extra each month.

3. Your options at the end are:
a. pay if off cash
b. refinance it
c. pay it off through by trading it in or selling it... only thing you have to consider here is your sale price/trade in value relative to your balloon payment

4. You pay all the tax upfront and the car is registered and titled in your name, so there is no sales tax on the balloon payment and you do get a sales tax credit when you trade the car in (if your state does this).

5. You can trade it in before the balloon payment is due, you would just have to get the payoff from the bank. It will be higher that what it would have been on a conventional finance.

6. The big one: Pay attention to the interest rate. You can pay alot more interest on a select since you are paying down less principal and you are carrying the balloon balance until the end. The standard rate for a Select is higher than a regular loan. However, when BMW does special financing offers like 0.9%, 1.9%, 2.9% these often do apply for a Select which makes the numbers much better.
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  #3  
Old 07-07-2009, 09:43 AM
Robert A Robert A is online now
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Sarafil: With BMW Select, is the buyer financial responsible for negative equity at the end of the term?
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  #4  
Old 07-07-2009, 02:48 PM
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Quote:
Originally Posted by Robert A View Post
Sarafil: With BMW Select, is the buyer financial responsible for negative equity at the end of the term?
Yes, whatever the balloon is, you are responsible... it does not matter what the value of the car is. There is no "walk away" option and you are obligated to that final payment. It also can not be negotiated like a lease residual. The only way it would be lower is if you had made extra principal payments during the term of the loan.

Many years ago, BMW was using balloon values that were close to the lease residuals and many people were coming back with negative equity. In the past 2 years, I have seen BMW significantly drop their balloon values to the point that they are now usually 5-10% less than a comparable term lease residual. It does result in a higher monthly payment, but the increased focus on low-APR financing (which was not offered before on the Select program) has offset this to keep the payments reasonable.
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Last edited by SARAFIL; 07-07-2009 at 02:51 PM.
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  #5  
Old 07-07-2009, 02:56 PM
Robert A Robert A is online now
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Sarafil, for some reason I thought that BMW Select was primarily designed as a substitute for traditional leasing in those states that had peculiar sales tax laws. Putting the buyer on the hook sounds like a recipe for disaster.
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  #6  
Old 07-07-2009, 03:04 PM
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Quote:
Originally Posted by Robert A View Post
Sarafil, for some reason I thought that BMW Select was primarily designed as a substitute for traditional leasing in those states that had peculiar sales tax laws. Putting the buyer on the hook sounds like a recipe for disaster.
You are referring to BMW's Owners Choice program not BMW Select.
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  #7  
Old 07-07-2009, 03:12 PM
Robert A Robert A is online now
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Got it -- I did have the two programs confused. So, how does BMW's Owner's Choice work? Or, more specifically, how is the balloon determined, and do the interest rates mirror those offered with traditional BMWFS financing?
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  #8  
Old 07-09-2009, 12:02 AM
ericas75 ericas75 is offline
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My intent is actually to buy and own my car for the long-term (at least 5-7 years), so I'm less worried about negative equity or not being able to walkaway from the balloon payment. Let's assume the current financing rate of 2.9% holds for traditional financing as well as BMW select.

Is interest incurred on the balloon payment over the course of the loan or is it deducted from the interest calculation? If there's no interest on the balloon, it seems very similar to moving a 2nd down payment to the end of the loan term.

Then that would mean a lower down payment up front while still maintaining lower monthly payments over the loan term relative to traditional financing. It seems like the total cost (including balloon payment) is lower over the life of the loan, right?
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  #9  
Old 07-09-2009, 04:28 AM
02fireman 02fireman is offline
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I haven't signed the final papers since my car has not arrived but the interest on the balloon is a good question. I know it is a set amount based on downpayment and interest amount but I need to ask whether or not the balloon includes built-in interest.
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  #10  
Old 07-09-2009, 07:31 AM
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SARAFIL SARAFIL is offline
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You are paying interest on the balloon, but fortunately with 2.9% rate it is not alot. BMW is loaning you that money for whatever length your loan is, so it is fair that they would collect interest on it. Also, on a loan your interest is calculated on the outstanding principal balance, so if it is not being paid until the end it will always be accruing interest.

If you google "amortization calculator with balloon" you should find some calculators that will let you plug in your amount financed, balloon and rate and see what the difference is in the interest.
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  #11  
Old 07-09-2009, 07:32 AM
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Quote:
Originally Posted by 02fireman View Post
I haven't signed the final papers since my car has not arrived but the interest on the balloon is a good question. I know it is a set amount based on downpayment and interest amount but I need to ask whether or not the balloon includes built-in interest.
The balloon is based only on the MSRP of the car and the term... it is a percentage of the MSRP. Your down payment and rate do not affect the balloon. There is no interest built into the balloon either.
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  #12  
Old 01-13-2010, 02:05 PM
SandNs new 528 SandNs new 528 is offline
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Sarafil,is it possible to find charts on the Select program to see rates & residuals. Select sounds similar to an open end lease which has worked well for me in the past PROVIDING the residuals are low enough at the term. Thanks for your help.
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  #13  
Old 01-15-2010, 07:53 AM
MikeCee MikeCee is offline
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Quote:
Originally Posted by SandNs new 528 View Post
Sarafil,is it possible to find charts on the Select program to see rates & residuals. Select sounds similar to an open end lease which has worked well for me in the past PROVIDING the residuals are low enough at the term. Thanks for your help.
You can make the balloon as low as you would like.
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  #14  
Old 01-17-2010, 01:45 PM
SandNs new 528 SandNs new 528 is offline
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Originally Posted by MikeCee View Post
You can make the balloon as low as you would like.
Understood - how can I determine what the current going rate is for "select". Thanksl
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  #15  
Old 02-03-2011, 11:36 PM
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