In order to compare one balloon loan program with another, we would need to break down the complete specifics of the program and deal. A more simple comparison can be done just looking at MRM, RV and rate for a specific model and trim. If you can share such data from BMW I can provide the corresponding AFG data.
However, given that no BMW’s appear on the AFG “hot list” I suspect the outcome may not be fantanstic.
I’ve done these payment saver loans for last 10 years. If you do this on cars that retain their value, you’ll come out ahead every single time. My Golf Rs were at $300/mo and when I sold/traded them, I still had equity, same with my RS3 and now with my M3. I just did a refi with one of these and my 82k M3 is $645/mo. That’s cheap.
I’ll be doing the same thing with my wife’s new '23 TRD Sequioa and our minivan which will be offered on Turo. Payment is one things … .why tie up capital with a car when they’re a depreciating asset … make them work for ya ;).
What bank / CU do you use if you’re willing to share?
Absolutely, I had a list of banks that had them in another thread that was posted here. Right now I’m using Deere Credit Union. I didn’t qualify with any other means other than investments (had to bring $10k over in order to qualify) but if you do payment saver credit union, just see what pops up in the search. What state are you in?
Any CU suggestion for Texas? Doesn’t seem to show up on Google when searching payment saver cu texas
Thanks for the write-up! Great to know!
Quick question since I am not familiar with WA tax laws,
What is this tax friendliness you’re talking about here in WA? I am from WA and maybe I can calculate my expected payments better.
Also, by looking at the AFG calculator, this is applicable for used cars as well (from recent years), right?
One thing that’s not clear to me (and excuse me for the very noob question) - if I sell the car after 12 months on a 60 month term balloon loan, what am I on the hook to pay? I initially thought it’s just the Balloon Payment but then I used the calculator and I don’t think it makes sense that I’ll need to pay just $4k?
I am trying to decide whether to finance/lease a new car or finance a CPO’d one - when checking for a used one’s price - it appears that the MRM/CRV is lower than the car’s selling price. What’s your take on higher selling price than the MRM/CRV? does it matter anyways?
Yeah, so let’s say your car is purchased for 50k, and you have a MRM of 40k, with a hypothetical residual at the end of the balloon of 60%.
That means you owe the depreciation between 50k and .6*40k (24k). Which is 26k, but if it was 40k, you’d owe the 16k total, you’re paying pure depreciation vs residualized (not to mention the APR on that).
I think he means OR which has 0 sales tax and is one state lower?
(@z0lt3c if I am wrong plz correct me!)
WA not sales tax friendly at all. Haha
$582x60=$34,920 plus $4k balloon
I crossed up my PNW states, I meant Oregon not WA. Reference here is any states without sales tax, or states which may offer a sales tax exemption on certain vehicle types (eg; NJ and EVs)
Gotcha. So if the monthly payment of a conventional loan is not an issue for a borrower (and the interest rate is similar for instance) - there’s not so much benefit to taking a balloon loan over a conventional one?
So it’s simply the leverage of the Balloon to lower the monthly payments mostly.
Hopefully I finally got it right 
This is all great information, I too was really confused about the inner workings of the balloon, but the more I research it the less intimidating they are
Here is an example I worked on today for a
2022 Toyota TACOMA 4WD Double Cab TRD Off Road V6 MT.
_ BL payment at $332/mo with $0 DAS
_ Keep for 2 years you will pay $332x24 and buyouts for $35K
_ Based on Manheim results, you sell it for $37K.
Your total cost of ownership is $5968.
Your effective payment is $248/mo.
Versus
2022 Toyota TACOMA 4WD Double Cab TRD Off Road V6 MT.
_ Conventional financing at $628/mo with $0 DAS
_ Keep for 2 years, you will pay $628x24 and buyout for $26K
_ Based on Manheim results, you sell it for $37K.
Your total cost of ownership is $4072.
Your effective payment is $169/mo.
Although the convention loan yields a lower TCO, due to less interest, it locks up $7104 more equity and requires $296/mo larger payments.
Dude you just made the argument against balloon loans…anyways. I care about TCO. And how accurate the residual is esp for luxury cars.
The interest cost on balloon loans can be brutal unless you’re getting a really cheap rate because your average daily balance stays high throughout the loan. Just make sure you go eyes wide open into total interest cost difference on balloon vs. a traditional 60 or 72 mo loan. In your example above - $1800 extra over 24 months vs. 7000 “tied up” - that extra 1800 is ~25% of the 7000. What else are you doing with that 7000 that will get you more?
Here is an interesting deal I found from the hot sheet for a mid size SUV.
2022 Jeep Compass Latitude Lux
_ Well equipped with a $34,000 MSRP
Rodo is offering a 48mo lease for $405/mo and $4080 DAS
_ $725 off MSRP and includes tax
@AutoCompanion is offering a 36mo lease for $486/mo with $486 DAS.
_ 8% off MSRP and includes tax
If you can get this vehicle at the broker price;
_ Conventional financing would be $501/mo with $0 DAS
_ BL program would be $386/mo with $0 DAS.
_ These calculation include 6.625% sales tax and $1000 in additional fees.
Looking for something cheaper??
_ 2022 Toyota Corolla LE AT with a $21,650 MSRP for $277/mo $0 DAS
I’m trying to understand how a Mitsubishi Outlander is on the list but there are no LR/RR?
Not too surprised, there are no high end cars on that list, that isn’t really where the bulk of the market is shopping. This is a sell sheet of main stream cars where a balloon might feel better than 84 month traditional loan to a fairly uninformed payment shopper that freaks out seeing the “84” number and not realizing the balloon might be even more expensive in long run.
