CS Deals, Steals, and Three-yulls on Wheels!

[gatorfast]

Originally Posted by M3GymNut

No its not. I'm only paying interest on the amount I owe not including the residual at the end of the 4yr loan. Which in the end is peanuts. I'm currently in the positive so when it comes to the end of the 4yrs I can decide to refinance for 2 yrs if I want to keep it or sell it and get a new vehicle. It's not a 10 yr loan by any means which I do not know where you got that random number. It's a type of option not for everyone because not too many people are diligent and consistent. You have lower monthly payments and can easily pay more to principal when you see fit.

I haven't fully looked into the intricacies of the select program but I think you are mistaken in how exactly it works and the true cost you are paying.

You are likely paying interest on the entire cost of the vehicle, less whatever you may have put down, which includes the balloon amount. The 10 year loan was just an example of the amortization profile of a loan structure for something like this...not that the loan is actually for 10 years but that the monthly payments reflect that of a longer amortization period.

Quick example with no interest: you have a $50k loan paid over 48 months with a balloon payment at maturity and an amortization profile of 10 years. Your monthly payments are $416 ($50k over 120 months) and at the end of 48 months your ballon is $30k ($50k less the $20k of installments you made). If this were a traditional 48mo loan your monthly payments would have been $1,041 ($50k over 48 months).

So your monthly payment is considerably less with the balloon option as you can see. However, you are paying down the principal at a much slower rate and therefore paying a much higher interest premium over the term. Using a 3% rate, you would pay approx $4,800 in interest in my example above using the balloon payment method over 48 months vs about $3,100 in interest with the traditional 48mo loan.

Again, I don't know exactly how the select program works but I don't think I am too far off in my reasoning above.

[paliknight]

Originally Posted by gatorfast

I haven't fully looked into the intricacies of the select program but I think you are mistaken in how exactly it works and the true cost you are paying.

You are likely paying interest on the entire cost of the vehicle, less whatever you may have put down, which includes the balloon amount. The 10 year loan was just an example of the amortization profile of a loan structure for something like this...not that the loan is actually for 10 years but that the monthly payments reflect that of a longer amortization period.

Quick example with no interest: you have a $50k loan paid over 48 months with a balloon payment at maturity and an amortization profile of 10 years. Your monthly payments are $416 ($50k over 120 months) and at the end of 48 months your ballon is $30k ($50k less the $20k of installments you made). If this were a traditional 48mo loan your monthly payments would have been $1,041 ($50k over 48 months).

So your monthly payment is considerably less with the balloon option as you can see. However, you are paying down the principal at a much slower rate and therefore paying a much higher interest premium over the term. Using a 3% rate, you would pay approx $4,800 in interest in my example above using the balloon payment method over 48 months vs about $3,100 in interest with the traditional 48mo loan.

Again, I don't know exactly how the select program works but I don't think I am too far off in my reasoning above.

He is mistaken. I'm certain there is no balloon loan that does NOT charge you interest on the balloon.

[M3GymNut]

Originally Posted by gatorfast

I haven't fully looked into the intricacies of the select program but I think you are mistaken in how exactly it works and the true cost you are paying.

You are likely paying interest on the entire cost of the vehicle, less whatever you may have put down, which includes the balloon amount. The 10 year loan was just an example of the amortization profile of a loan structure for something like this...not that the loan is actually for 10 years but that the monthly payments reflect that of a longer amortization period.

Quick example with no interest: you have a $50k loan paid over 48 months with a balloon payment at maturity and an amortization profile of 10 years. Your monthly payments are $416 ($50k over 120 months) and at the end of 48 months your ballon is $30k ($50k less the $20k of installments you made). If this were a traditional 48mo loan your monthly payments would have been $1,041 ($50k over 48 months).

So your monthly payment is considerably less with the balloon option as you can see. However, you are paying down the principal at a much slower rate and therefore paying a much higher interest premium over the term. Using a 3% rate, you would pay approx $4,800 in interest in my example above using the balloon payment method over 48 months vs about $3,100 in interest with the traditional 48mo loan.

Again, I don't know exactly how the select program works but I don't think I am too far off in my reasoning above.

The part where you are far off which makes a huge difference in financials is I am paying interest on only the balance that does not include the residual amount at the end of the term. The majority does go to principal since its on a smaller amount and the interest rate is pretty good.

[Maitre_Absolut]

Originally Posted by M3GymNut

The part where you are far off which makes a huge difference in financials is I am paying interest on only the balance that does not include the residual amount at the end of the term. The majority does go to principal since its on a smaller amount and the interest rate is pretty good.

You are completely wrong. You ARE paying interest on the balloon, there is no way around it. Finance 101.

This is proof that their marketing has worked. Create a complicated borrowing arrangement to make it seem favorable. In the end it is definitely not.

Live and learn...

[trendy26]

Originally Posted by Maitre_Absolut

You are completely wrong. You ARE paying interest on the balloon, there is no way around it. Finance 101.

This is proof that their marketing has worked. Create a complicated borrowing arrangement to make it seem favorable. In the end it is definitely not.

Live and learn...

You sir are 100% correct.... Definitely a great Marketing plot by BMW. I researched BMW Select years back, and initially assumed that you only paid interest on the amount you were paying down, yet simple math will show that interest is also charged on the Balloon amount as well when you calculate out the actual payment for BMW Select financing

[spool twice]

I know with Penfed Payment Saver, you are paying interest on the entire amount financed, meaning you pay the entire amount you technically are responsible for (the payments + balloon payment). You are still basically financing the entire amount of the loan, it's just on an alternative amortization schedule. I would imagine BMW Select is similar.

Think of it from this perspective, BMW FS is still paying the dealer the full amount agreed amount of the loan, so they can charge you the full interest because you aren't buying the car from BMW FS, you are buying the car from the dealer with a BMW FS loan, albeit an alternative loan schedule. It wouldn't even surprise me if the interest would be similar to how a lease works, where you are paying interest on the net capital cost + the final balloon payment, and not simply on the amount you "borrow" for the principle payments.

One great thing about a lease though, is that on your credit report it only shows the total amount of the lease payments, whereas a PenFed Payment Saver and likely BMW Select will show the entire loan amount. The reason is on a lease, you are only responsible for the total lease payments, whereas on the other items, you are technically always responsible for the entire amount financed (payments + balloon payments).

[paliknight]

Originally Posted by spool twice

I know with Penfed Payment Saver, you are paying interest on the entire amount financed, meaning you pay the entire amount you technically are responsible for (the payments + balloon payment). You are still basically financing the entire amount of the loan, it's just on an alternative amortization schedule. I would imagine BMW Select is similar.

Think of it from this perspective, BMW FS is still paying the dealer the full amount agreed amount of the loan, so they can charge you the full interest because you aren't buying the car from BMW FS, you are buying the car from the dealer with a BMW FS loan, albeit an alternative loan schedule. It wouldn't even surprise me if the interest would be similar to how a lease works, where you are paying interest on the net capital cost + the final balloon payment, and not simply on the amount you "borrow" for the principle payments.

One great thing about a lease though, is that on your credit report it only shows the total amount of the lease payments, whereas a PenFed Payment Saver and likely BMW Select will show the entire loan amount. The reason is on a lease, you are only responsible for the total lease payments, whereas on the other items, you are technically always responsible for the entire amount financed (payments + balloon payments).

Balloon loans are like leasing but you assume all the risk of depreciation.

[jmg]

Originally Posted by paliknight

Balloon loans are like leasing but you assume all the risk of depreciation.

Ferrari does open ended leases and they are attractive for this reason. Properly optioned and limited production high end Ferraris that require hard to get allocations don't depreciate like regular cars. The customer can lease the Ferrari at an "affordable" monthly payment and sell the car to pay off the balloon for close to what they paid, lowering overall cost of ownership or even making money.

[gatorfast]

Originally Posted by jmg

Ferrari does open ended leases and they are attractive for this reason. Properly optioned and limited production high end Ferraris that require hard to get allocations don't depreciate like regular cars. The customer can lease the Ferrari at an "affordable" monthly payment and sell the car to pay off the balloon for close to what they paid, lowering overall cost of ownership or even making money.

Sounds like BMW is the anti-Ferrari since these cars drop like a rock lol

[02M3ForMe]

What kind of deals can be worked out on the 2020 M4 CS? $7xx monthly payments feasible yet?

[330cibimmer]

Originally Posted by 02M3ForMe

What kind of deals can be worked out on the 2020 M4 CS? $7xx monthly payments feasible yet?

I doubt it since it just came out. I would guess it'll be around next summer but check out leasehackr forums to see if deals are out there yet

[minn19]

Originally Posted by 02M3ForMe

What kind of deals can be worked out on the 2020 M4 CS? $7xx monthly payments feasible yet?

Always feasible depending on how much cash you want to put for a downpayment.

[spool twice]

yeah, without a downpayment, doubtful 2020 CS's will be in the $700 range yet. BMWUSA incentives aren't there yet, and I don't believe there is trunk/flagship money on the 2020 M4cs's, but give it until next May when BMW will rinse/repeat.

plenty of 2019s though...

[vitaly]

It's really mind boggling that BMW apparently didn't change a thing with 2020s in terms of pricing. Why are they setting themselves (and dealers) up for 25-30% off deals again?? Maybe they'll trim production some this time around though.

[minn19]

Originally Posted by vitaly

It's really mind boggling that BMW apparently didn't change a thing with 2020s in terms of pricing. Why are they setting themselves (and dealers) up for 25-30% off deals again?? Maybe they'll trim production some this time around though.

That tells me they are still making money on the car even if they have to offer big incentives to get rid of them. They would just stop building them if they weren’t. Along that line I’m guessing the 2020 M4 CS production numbers will be pretty low in the end.

[02M3ForMe]

Are the Three-yulls over?

[sdshah]

Originally Posted by 02M3ForMe

Are the Three-yulls over?

Just pick up a lease takeover. There are going to be tons of them of people who just got a lease Bc they thought they were missing the boat.

[CanAutM3]

Originally Posted by minn19

That tells me they are still making money on the car even if they have to offer big incentives to get rid of them. They would just stop building them if they weren’t. Along that line I’m guessing the 2020 M4 CS production numbers will be pretty low in the end.

For sure, they are making tons of money on a CS. What is their incremental cost for making a CS over a base M4? It's only a small fraction of MSRP increase IMO. So they can easily afford the discounts and make good profit.

[aerostar]

Originally Posted by Maitre_Absolut

You are completely wrong. You ARE paying interest on the balloon, there is no way around it. Finance 101.

This is proof that their marketing has worked. Create a complicated borrowing arrangement to make it seem favorable. In the end it is definitely not.

Live and learn...

Yup.

Even if he *was* correct and he wasn't paying interest on the loan. Then he would have to lump sum the balloon w/ cash or he re-finances the balloon but now the car is a used car.

So then he's paying a higher interest rate + a bank fee. Lose lose.

[M3GymNut]

Originally Posted by aerostar

Yup.

Even if he *was* correct and he wasn't paying interest on the loan. Then he would have to lump sum the balloon w/ cash or he re-finances the balloon but now the car is a used car.

So then he's paying a higher interest rate + a bank fee. Lose lose.

When I refinance the loan amount I plan on doing it for 2 years and with the right bank and credit I'll be able to get the same rate I have now so it's actually a win. Also, because of the select plan I'm positive on the vehicle so I can sell it at any time and use it as a down or just pocket it, again another win.

[Colinv6]

Originally Posted by Maitre_Absolut

You are completely wrong. You ARE paying interest on the balloon, there is no way around it. Finance 101.

This is proof that their marketing has worked. Create a complicated borrowing arrangement to make it seem favorable. In the end it is definitely not.

Live and learn...

I got my M4CS on a BMW select deal in the UK, on a 0% interest deal. So I’m paying no interest on the monthlies, or the balloon

[aerostar]

Originally Posted by M3GymNut

When I refinance the loan amount I plan on doing it for 2 years and with the right bank and credit I'll be able to get the same rate I have now so it's actually a win. Also, because of the select plan I'm positive on the vehicle so I can sell it at any time and use it as a down or just pocket it, again another win.

A select loan would make you more negative than traditional finance would if you use the same terms...

You have a bubble you're financing at the end... you can't be more positive lol