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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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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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Old 07-07-2009, 09:43 AM
Robert A Robert A is offline
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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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Old 07-07-2009, 02:48 PM
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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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Old 07-07-2009, 02:56 PM
Robert A Robert A is offline
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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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Old 07-07-2009, 03:04 PM
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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.
You are referring to BMW's Owners Choice program not BMW Select.
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Old 07-07-2009, 03:12 PM
Robert A Robert A is offline
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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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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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Old 07-09-2009, 04:28 AM
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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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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
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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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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
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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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Old 02-03-2011, 11:36 PM
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Old 01-03-2016, 12:17 AM
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http://www.bmw.ie/en/topics/owners/f...--finance.html
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Old 01-05-2016, 06:09 AM
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Well BMW Select might not be so bad after all... For ex, Traditional Finance you pay upfront (tax) too and it depreciates just like any other car. With BMW Select you can trade/sell your car off any time and not having a huge monthly like Finance is not bad. Most of the time there's not a winning situation when you own a car bought from the dealer.
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Old 01-05-2016, 08:45 PM
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Originally Posted by LycanNyc View Post
Well BMW Select might not be so bad after all... For ex, Traditional Finance you pay upfront (tax) too and it depreciates just like any other car. With BMW Select you can trade/sell your car off any time and not having a huge monthly like Finance is not bad. Most of the time there's not a winning situation when you own a car bought from the dealer.
I think it comes down to whether you will be in a good financial situation down the road where you can afford the balloon payment. If not, either finance (if you can afford it) and keep the value of the car for further trade-in or lease for a low payment but own nothing.
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Old 01-06-2016, 11:10 AM
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Correct me if I'm wrong since I'm just trying to understand this balloon payment. I have a friend that has done it in his last 3 cars (he doesn't keep them for 60 months either and finds the lease contract not to fit him)

- Balloon/BMW Select is the same as financing (uses same APR rates i think)
- Lease/Lower payments a month (could do 36 months or even 60 months)
- Allows you to enjoy a car, no mileage limit
- no MSDs
- tax upfront on the full value

Now my question is, the balloon payment at the end is it like a residual value or is it sum at the end ?
For ex, what if the residual value of the car (lease) is higher than what the car/market/value is in 36 months ?
What if the balloon payment of the car at the end of the term is lower than a residual value or current market price?

Thanks
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Old 01-06-2016, 12:28 PM
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Higher or lower, you owe the balloon balance. There is no residual value protection like a lease or Owners Choice.
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Old 01-06-2016, 12:59 PM
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Originally Posted by LycanNyc View Post
Correct me if I'm wrong since I'm just trying to understand this balloon payment. I have a friend that has done it in his last 3 cars (he doesn't keep them for 60 months either and finds the lease contract not to fit him)

- Balloon/BMW Select is the same as financing (uses same APR rates i think)
Both BMW Select and Owner's Choice are conventional finance contracts but with low lease-like payments because of the balloon payment at the end. The main difference between BMW Select is that it doesn't offer you the option to walk away from the car when the balloon payment comes due like Owner's Choice does, which is why they don't care how many miles you put on the car. Owner's Choice is available in Illinois, Texas and Georgia only. I don't understand why they're still offering it in Illinois since that state fixed the way it charges use taxes on leases effective Jan. 1, 2015 -- a year ago. It's really only Texas and Georgia that still totally screw lease customers.

BMW Select is a regular loan but with the last payment being a big balloon payment. You can pay the balloon payment and keep the car or you can refinance the balloon payment as a used car loan or you can trade the car in. One of the biggest drawbacks, and why no one should really consider BMW Select in my opinion, is that you're never going to benefit from one of BMW's lease pull-ahead offers. Because you don't have a lease. You have a finance contract.

The APR on BMW Select is whatever BMWFS is offering at the time but it may be slightly higher than the APR on other conventional finance contracts, and the dealer is allowed to mark up the rate a little to earn a few extra bucks on the deal after you beat him to death on the front end.

Quote:
Now my question is, the balloon payment at the end is it like a residual value or is it sum at the end ?
The total of the regular monthly payments and the last payment (called the balloon payment) equals the total balance due on your loan after your down payment (if any). You're paying interest on that total amount during the term of your contract, just as you would be paying a "rental charge" on the total amount of the net cap cost plus the residual on a lease. It's called "interest" on a loan and "rental charge" on a lease but it's basically the same thing.

Quote:
For ex, what if the residual value of the car (lease) is higher than what the car/market/value is in 36 months ?
Congratulations, you still own it. I would say "you have a firm grip on it."


Quote:
What if the balloon payment of the car at the end of the term is lower than a residual value or current market price?
See previous response.



P.S. -- If it's a lease, it's titled:
BMW Financial Services -- Lessor
Your Name -- Lessee

BMW Financial Services, Lienholder

If it's a loan, it's titled:

Your name

BMW Financial Services, Lienholder

In other words, you're the registered owner on a loan and BMWFS is the lienholder and legal owner until you pay off the loan in full. If it's a lease, BMWFS is the registered lessor and you're the lessee (renter) and BMWFS is the lienholder and legal owner. If you want to own the car at the end of the lease, you have to purchase it for the agreed upon price. If you want to own the car at the end of any kind of conventional finance contract all you have to do is pay it off -- you're already the registered owner of the car but not the legal owner until you finish paying all of the payments on it.
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Old 01-06-2016, 02:55 PM
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Ninong, always with the answers! thank you

So if I got a bmw select right now and decided to sell the car in 2yrs before my 60 month term.. isn't it the same if I were to finance the car with at traditional finance and sell the car?
Except with the select I have lower payments and keeping more money in my pocket ?

Financing (NEW) will cost too much each month
Leasing depending on model and options will have you with higher payments too, mileage limit and over mileage has increased =\
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Old 01-06-2016, 03:32 PM
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All this headache of deciding is why I found a gem on the CPO lot and bought it as a traditional finance with low "lease-like" payments but I own it at the end.
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Old 01-06-2016, 03:41 PM
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Quote:
Originally Posted by TXPearl View Post
Higher or lower, you owe the balloon balance. There is no residual value protection like a lease or Owners Choice.
Quote:
Originally Posted by FallsT View Post
All this headache of deciding is why I found a gem on the CPO lot and bought it as a traditional finance with low "lease-like" payments but I own it at the end.
Sure its a 2012/328

But in this case we're referring to cars BRAND NEW and that we can't afford right away..
55-70k price range

I currently bought traditional finance thru CreditUnion my 59k msrp car, for 44k out the door with 11,000 miles (a few months old) CPO Elite =D
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Old 01-06-2016, 04:02 PM
Ninong Ninong is offline
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Originally Posted by LycanNyc View Post
So if I got a bmw select right now and decided to sell the car in 2yrs before my 60 month term.. isn't it the same if I were to finance the car with at traditional finance and sell the car? Except with the select I have lower payments and keeping more money in my pocket ?
As with a traditional finance contract, all you have to do is call BMWFS for your current 10-day payoff. That's what it will take to clear the title. If you're selling the car, then typically it's the guy who is purchasing the car from you who is interested in paying off the balance due on the loan to make sure it's going to be his. In other words, if he has agreed to buy it from you at a purchase price that is higher than what you still owe on it, then he would give you a check for the difference between the payoff amount and the agreed upon selling price and you would give him a bill of sale and an authorization for payoff so that he can pay BMWFS directly and they will send him the title and not you. It's that authorization for payoff that you signed that gives him the legal right to do that and allows BMWFS to send him the title.

All of that is done very carefully and quite often through a neutral third party service. Either that or you both deal with BMWFS so that both of you are satisfied that neither one of you will be left holding the bag. All of that assumes the new buyer is paying cash for the car. If he's financing it, then his credit union or bank may offer to arrange all of this stuff for you guys since they will want to be named on the authorization for payoff so that they can pay off BMWFS and get the title registered with them as the new lienholder/legal owner and the new buyer as the registered owner.

Now, if this works out the way most of these deals do, the new buyer won't be giving you anything because your payoff will be higher than what he has agreed to pay you for the car. In a situation like that, you have to give him a check payable to him for the difference between the payoff and the amount you still owe. In other words, you have negative equity.

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