[SevenNine]

Hello,

I'm trying to figure out how is the payment calculated with BMW Select option. Can anyone with experience help me understand if I have it correctly?

Let's use the following example:

MSRP = $45,000

Residual value is $15,000

Sales tax is 10%

Interest rate is 4%

Sale price = MSRP

(msrp - residual) + sales tax = loan amount / 60 at 4%

(45,000 - 15,000) + 4,500 = 34,500 / 60 at 4% = 635.37 monthly payment

Do I have this correct? The residual of 15,000 is the ballon payment. That is paid at the end. Correct?

If I use 5,000 downpayment that brings the sale price and sales tax amount down thus makes the monthly payment lower.

45,000 - 5,000 = 40,000 with 4,000 sales tax.

45,000 - 5,000 = 40,000 - 15,000 = 25,000 + 4,000 = 29,000 / 60 at 4% = 534.08

Are my calculations correct or am I missing something?

Thanks in advance

[WarrENDeatH]

I am curious about this too. I was approved through BMWFS for select with an M340. Dealer said it was just the approved one and added options would change the residual 8%. The payment they quoted me was 500 more than the select option on the website. I need to call and talk with BMW. Dealer also was pretty adamant about not using it to begin with.

Very strange

[SevenNine]

Originally Posted by WarrENDeatH

I am curious about this too. I was approved through BMWFS for select with an M340. Dealer said it was just the approved one and added options would change the residual 8%. The payment they quoted me was 500 more than the select option on the website. I need to call and talk with BMW. Dealer also was pretty adamant about not using it to begin with.

Very strange

What was the msrp/sale price on the M340? Did he give you any info no the actual residual/balloon payment, interest rate, taxes, etc.?

[RigaTony1982]

It's basically the exact same as a lease (I had whatever the Audi version is called on my A5).

In Chicago (and some other areas), there is a bullshit "lease and use tax" on top of the regular sales tax. Once your lease payment is calculated using a traditional lease formula (including sales tax) the city then adds another 9% on top of it for this "lease and use" tax. So you're basically being taxed twice. A lease in the city of Chicago has a sales tax rate of 10.25% plus the 9% on top of that, so a wonderful 19.25%.

BMW select is designed to get around this by classifying it as a sale instead of a lease. Your ballon payment at the end is just whatever the residual would be at the end of whatever term you choose. It will state in the contract one of the options is to have BMW buy back the car at the end of the term at whatever the determined balloon (or residual value) is.

The only real benefit is in a case like this, where there's some tax implications. Otherwise you're better off just doing a traditional lease or finance offer.

[WarrENDeatH]

Originally Posted by SevenNine

What was the msrp/sale price on the M340? Did he give you any info no the actual residual/balloon payment, interest rate, taxes, etc.?

MSRP was 65k and balloon payment final was like 13k, I believe. I wasn’t given interest but was given taxes. It came out to be more than doing a traditional loan. The whole thing didn’t feel right to me. I need to call BMW FS and double check

[TurtleBoy]

Originally Posted by RigaTony1982

It's basically the exact same as a lease (I had whatever the Audi version is called on my A5).

In Chicago (and some other areas), there is a bullshit "lease and use tax" on top of the regular sales tax. Once your lease payment is calculated using a traditional lease formula (including sales tax) the city then adds another 9% on top of it for this "lease and use" tax. So you're basically being taxed twice. A lease in the city of Chicago has a sales tax rate of 10.25% plus the 9% on top of that, so a wonderful 19.25%.

BMW select is designed to get around this by classifying it as a sale instead of a lease. Your ballon payment at the end is just whatever the residual would be at the end of whatever term you choose. It will state in the contract one of the options is to have BMW buy back the car at the end of the term at whatever the determined balloon (or residual value) is.

The only real benefit is in a case like this, where there's some tax implications. Otherwise you're better off just doing a traditional lease or finance offer.

I think you are thinking of Owner's Choice, that was designed for lease unfriendly states and is available only in GA, Il and TX.. BMW Select is simple balloon financing.

[TurtleBoy]

Originally Posted by SevenNine

Hello,

I'm trying to figure out how is the payment calculated with BMW Select option. Can anyone with experience help me understand if I have it correctly?

Let's use the following example:

MSRP = $45,000

Residual value is $15,000

Sales tax is 10%

Interest rate is 4%

Sale price = MSRP

(msrp - residual) + sales tax = loan amount / 60 at 4%

(45,000 - 15,000) + 4,500 = 34,500 / 60 at 4% = 635.37 monthly payment

Do I have this correct? The residual of 15,000 is the ballon payment. That is paid at the end. Correct?

If I use 5,000 downpayment that brings the sale price and sales tax amount down thus makes the monthly payment lower.

45,000 - 5,000 = 40,000 with 4,000 sales tax.

45,000 - 5,000 = 40,000 - 15,000 = 25,000 + 4,000 = 29,000 / 60 at 4% = 534.08

Are my calculations correct or am I missing something?

Thanks in advance

You are missing the interest on the balloon. The payment for the select consists of the interest on the balloon plus the payment on the loan.

The balloon amount is calculated based on your credit score, length of loan and MSRP, perhaps total loan amount. In this case the balloon likely will be 27% which results in a balloon of 12,150.

Your loan amount would be 45,000 - 12,150 + 4,500 = 37,350. The monthly payment for a 60 month loan at 4% on that loan amount would be 687.86.

The interest on the balloon would be (12,150 * .04 * 5) / 60 = 40.50

That would make your monthly payment be a total of $728.36.

A down payment will lower your loan amount but it will not lower your sale tax, that is levied on the sales price.

[WarrENDeatH]

So, pulling some numbers off the sales sheet I was given. I talked to BMW FS and all they said was to seek a second opinion.

Sales Price - 65,190
Rebates - 1,250
M Protecf - 899
Trade in - 28,000
Trade Allowance - 32,967
Trade Tax Savings - 1,960
Gov Fee - 139
Doc Fee - 299
Total Tax - 2,684
Cash Down - 7,690 (what they listed)
Amount Financed - 65,190
Balloon Payment - 13,689
Monthly - 1269

[TurtleBoy]

Originally Posted by WarrENDeatH

So, pulling some numbers off the sales sheet I was given. I talked to BMW FS and all they said was to seek a second opinion.

Sales Price - 65,190
Rebates - 1,250
M Protecf - 899
Trade in - 28,000
Trade Allowance - 32,967
Trade Tax Savings - 1,960
Gov Fee - 139
Doc Fee - 299
Total Tax - 2,684
Cash Down - 7,690 (what they listed)
Amount Financed - 65,190
Balloon Payment - 13,689
Monthly - 1269

BMWFS can't talk about deals, that is totally in the hands of the dealer. What info are you looking for? You look to be way underwater on your current car so you just need to eat that $5k. Have you tried going to CarMax, Zoom, etc. to see what they would offer you?

What is the interest rate they are charging you? Once you know that you can compare to traditional financing to see how much extra the Select is costing you and you can make the determination. Although of course the monthly payment will be higher.

[RigaTony1982]

Originally Posted by TurtleBoy

I think you are thinking of Owner's Choice, that was designed for lease unfriendly states and is available only in GA, Il and TX.. BMW Select is simple balloon financing.

Ugh, you're right. I'm sorry OP. I had the two confused.

[WarrENDeatH]

Originally Posted by TurtleBoy

BMWFS can't talk about deals, that is totally in the hands of the dealer. What info are you looking for? You look to be way underwater on your current car so you just need to eat that $5k. Have you tried going to CarMax, Zoom, etc. to see what they would offer you?

What is the interest rate they are charging you? Once you know that you can compare to traditional financing to see how much extra the Select is costing you and you can make the determination. Although of course the monthly payment will be higher.

All those listed are far less than the dealers.

They wouldn’t give me the rate after asking. Regardless, it says the final sales price is 65k and that’s with 7k down and it is still almost 1300? That’s about 500 higher than it should be. Something isn’t adding up, but it is what it is.

[TurtleBoy]

Originally Posted by WarrENDeatH

All those listed are far less than the dealers.

They wouldn’t give me the rate after asking. Regardless, it says the final sales price is 65k and that’s with 7k down and it is still almost 1300? That’s about 500 higher than it should be. Something isn’t adding up, but it is what it is.

If they won't give you the rate walk away. It is likely the going rate of 5.29%.

It is not $500 too high, it is about $200. The payment on that should be around $1,040 a month with the balloon at the end.

Ask them to go through the numbers again and give you the interest rate being.