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I am new to the idea of BMW Select, but if I am understanding this correctly the M2 may be the perfect car for BMW Select if you are looking to keep your monthly payment lower than the approx. $900-1000 a lease would be.
From what I understand, BMW Select will always cost more than a traditional finance in terms of total interest paid. So let's be clear about it - many people that lease or finance via BMW Select are looking to preserve liquidity in exchange for a bit of a higher cost down the road. Nothing wrong with that, I am looking to do that too.
What I think makes the M2 perfect for BMW Select is two things - BMWs lease residuals are insanely out of whack with their other cars, but the BMW Select residual is not. The second thing is that the M2 will likely enjoy a depreciation curve that is not nearly as bad as most cars, and for the first year or two of the loan if a decent down payment is placed, the owner may never even be under water.
The M2 residual for BMW Select is 37%. On a $57k car, that is about $20k. A 5 year old M2 is going to be worth significantly more than $20k. I did a search on 2011 M3s and the cheapest one in the country is $28k. A $28k remainder on a 37% residual would mean a MSRP of $78k, which we all know that generation of M3 couldn't get up to. So this means that the BMW Select residual is basically set too high, as opposed to the lease residual being set too low.
The way I calculate it:
MSRP of $57,395 after fees for a LBB with exec pack
Add in 5.75 sales tax for my state = $60695
$60695 - $5000 down payment = $55695 total cap cost
With 37% residual @ 2.99% that makes $35,088 regularly financed with a $20607 balloon
There are two components to the monthly payment - interest on the balloon and then the normal financed amount.
To figure out the balloon interest portion, I did $20607 x .029 x 5 / 60 =$49.8/mo
To figure out the financed portion I did $35,088 at 3.9% using a calculator....ends up $630 per month.
So using BMW select with $5k down, total monthly payment after fees and taxes is $679.8 per month.
Total cost of BMW select financing = 679.8 x 60 + 20607 which = $61395
Total cost of traditional financing $55695 @ 2.99 = 1003 x 12 = $60180
So I am basically paying BMW an additional $1215 in interest to preserve $330 per month in liquidity vs traditional financing. This is the upshot of BMW Select. Here is where it gets better: 37% residual seems very favorable as a 5 year old M2 will be worth well more than $20,000. Given a $5k down payment and limited supply for the next couple of years, I believe I will never at any point be upside down (at least not significantly), while preserving the ability to sell the car and walk at any time and having no mileage restrictions of a lease. If I decided to sell the car to make the balloon payment, I would likely have several thousand dollars of equity in the car at that point.
This seems too good to be true?
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