Just received an offer from a dealer but I am not sure it’s a good deal. I am located in Chicago, so the tax is high (10.25%). I’ve never heard of a balloon loan before (BMW OwnersChoice Program), so it’s been tricky translating to the LH Calculator. Car has these installed upgrades: Premium Package, Panoramic Moonroof, Parking Assistance Package, Heated Seats & Steering Wheel
Below are the deal parameters:
Type of Loan: Balloon Lease
Term: 39 months, 12K miles/year
Interest Rate: 5.18%
Tax: 10.25% (Chicago)
MSRP: $53,195
BMW Cash Allowance: $1,000
Selling Price: $50,600
Residual: 55%
Total due at signing: $5,000 (1st payment due a month later)
Monthly Payment $715.48
Big downside to OC is interest rate tends to be much higher as compared to MF on a lease with base rate and full MSD…also pay full taxes on the purchase price…lease has benefit that taxation can change if you leave a tax heavy area like Chicago. Need to run a full TCO on both living in the city. Back in the day believe it or not lease TCO even with 18+% taxation actually ended up cheaper due to low MF/MSD.
Risk here too on OC:
At the end of the loan term, your balloon balance is due. You can pay the balance in full, apply to refinance the balloon balance, or, if you have equity in your BMW, you may be able to use the trade-in value to help cover the balance.
Also, I don’t think gap included on OC but no acquistion cost either…if OP does this he really needs to read and understand every word of that contract!
It makes much more sense to just finance/write a check living in the City.
So the way the sales person explained it to me is that I don’t have to buy the car at the end of the term. The only risk is the valuation of the car. They do a 55% RV so if it’s less then I might be on the hook for the difference. I wouldn’t be interested in keep the car outside of the 39 months. She did mention that the OwnersChoice program was her recommendation for avoiding the tax and that the bigger tax benefit is on the 2nd car.
Thank you for all of the watch outs! I’m still trying to figure out what a realistic payment expectation is based on what I can put toward DAS funds. Will keep searching the site and doing some more research. Out of the three dealers I’ve spoken to, this offer has been the best payment wise - the other two were lease offers
You can’t just look at payment alone…you really need to sit down and compare the math on lease vs balloon vs traditional finance taking into account DAS, etc (you are putting 5000 cash down on the balloon, how does that compare to the lease?)…and the valuation of car at end of lease is a big risk if you plan on returning…it could be worth several thousands of dollars less (this could effectively add hundreds to your monthly payment)…you do get a tax credit by applying value worth at end of lease to a new vehicle but that would only be a couple thousand dollars.
PS, Perillo discounts stink…quote the burbs…8-10% off MSRP plus any rebates should be possible on an X3 at year end.
Have heard that before about Perillo so will keep searching. I might just go with a broker to avoid all of the hassle/process. Thanks again for the insights.
Yeah if you aren’t going to put the time in you will get hosed…downside is brokers may not want to get involved since OC is such a rarity they don’t want to deal with either. Financing is the best way in the City. When I lived downtown I always shopped and bought in burbs and wrote a check.
I see 2.99% financing for 60 and 1000 credit on financing on X3 now. 50K at 2.99 for 60 is a little over 700/mo. Just pay for tax dealer plate out of pocket then. After 39 months you will only owe 16K on it…so should be plenty of equity!
