"BMW select"

[JTsyo]

Trying to figure out what this is exactly.

BMW Select

BMW Select is an innovative retail balloon financing product that combines the low monthly payments of leasing and the security of ownership. You make low monthly payments for your selected term then reach a decision point:
1. You can refinance the balloon payment amount; or
2. You can complete your purchase by making the balloon payment.

BMW Select is a good alternative if you prefer the benefits of ownership and a low monthly payment.

So I throw a 35K car into their calculator. With 15K down and 36 months, it comes out to payments of $97. So you pay about $3600, which I would assume is just interest. After the 36 months you can either pay the remainder or get a new loan?

 

[DeviousTrap]

I'd interpret that the same way as you. It's financial suicide.

A lease has low payments because you're only paying interest and the difference between purchase price and residual. While you have no equity in the car, you walk away after 3 years with no more obligations.

Here you're paying 3 years worth of interest and you're still stuck with the car. The "balloon payment" will be much higher than the actual value of the car, so you'll be stuck with either overpaying to purchase a car or a very heavily upside-down loan.

 

[RKS]

aren't Interest Only & ARMs the reason so many people over-bought and are now in foreclosure?

 

[Ferzerp]

Exactly. "DeviousTrap" is right (and perfect name for this!)

It's a lease, where at the end, you don't have the option to walk away.

 

[PricklyPete]

Yes, this is horrible, this idea. - Samir

 

[hanoverphist]

but when poor people see BMW for a hundie a month they will be all over it!

 

[EightySix Four]

While you guys are obviously correct about the purpose of the program, depending on the interest rate, you may be able to make a bit of money if you can save your balloon payment at a higher rate