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      07-22-2020, 10:09 AM   #1
medphysdave
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Educate me on Europe balloon loans

I'll tie this to being M2 related. Was watching a recent YouTube video where person mentioned he got an M2C for almost the same payment as a used OG. He then mentioned the balloon payment. This intrigued me as I haven't used one, don't think it is available in the US from most banks, and want to be educated by forum members familiar with the process.

Is this being used as a method to lease? I read that you can return the car without penalty after 50% of the loan is paid? Are buyers typically holding cars during the normal period and the selling before the balloon payment is due.

It's intriguing because in a lot of ways it shifts some risk away from the buyer and into the bank. I'm not looking to recoup my equity at the time of sale, just sell it for what is owed. This is an oversimplification. If you can get terms at least as good or better than depreciation you could use it like a lease.
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      07-22-2020, 03:30 PM   #2
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It's called "Special financing" if you have super credit. You get 0.9% financing on the vehicle with low monthly payments and then a larger fixed sum to be owed at the end of the loan period.
Let's say the amount financed was $44k, the finance charge is about $1400 and then you would pay about $480 per month for 59 months and at the end then pay a $16,500 payment for month 60.
All that time if you had cash in your money market account or at your broker it's making well more than the $1400 you paid in interest (you hope). If you are worried about the balloon payment then at least a 5 year old M2 could be sold for more than $16,500 quite quickly!
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      07-22-2020, 08:48 PM   #3
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Educate me on Europe balloon loans

Oh- and it's through BMW financing, not a bank. I believe you need an Experian credit rating of 875 or 880 with past experience in financing with BMW. You can ask your dealer (as they don't publicize this rate unless you know about it). I don't think many folks qualify for it though.
No you cannot give back the car after 50% is paid. You owe the full amount of the loan and have to pay it in full.
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      07-23-2020, 09:45 AM   #4
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Its called BMW Select. not sure if it is still being offered, but you end up paying more for the car over the term of the finance. its a 36/48 month term with a balloon payment due at maturity with no option for negotiation on that amount.
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      07-30-2020, 03:12 PM   #5
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Some credit unions also offer this type of thing, sometimes called payment saver
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      08-12-2020, 10:55 AM   #6
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Its still being offered. Im using this payment method. Your credit doesnt have to be that high. As long as its over 720 you can qualify for the special financing. Of course interest goes up the lower your credit is. I got mine for 1.9%

I did the math and it just makes sense for me. I only plan on keeping this car between 3-5 years. The 3 year mark is when the amount owed on the car breaks even with how much a used car is worth at that point. Granted the m2C hasnt been out that long, howeveer i was comparing numbers as an average between the M3 and the OG M2.

Originally, i was going to be paying 1250$ a month with 7k down. However with the special financing i am paying just under 900$ a month with 7k down. Im hoping that this car will retain its value almost as good as the OG M2 and be worth about 30k in 3 years. Even if its not, by 5 years i will then owe about 18k as my balloon payment. An equivalent M2/M3 with 60k miles is still about 25-30k depending on area, so i'd come out ahead in that aspect. While this car is my daily driver, I only drive on weekends due to the pandemic. So i fully expect to be at around 48k miles or less in 5 years which should up my value.

I think the balloon option is a good option if you dont plan on keeping the car and hope to break even in a few years to move onto something else. But if you are going to keep the car, then just finance the whole thing. You'll save yourself more money that way.
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      08-12-2020, 11:17 AM   #7
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Quote:
Originally Posted by xxyion View Post
Its still being offered. Im using this payment method. Your credit doesnt have to be that high. As long as its over 720 you can qualify for the special financing. Of course interest goes up the lower your credit is. I got mine for 1.9%

I did the math and it just makes sense for me. I only plan on keeping this car between 3-5 years. The 3 year mark is when the amount owed on the car breaks even with how much a used car is worth at that point. Granted the m2C hasnt been out that long, howeveer i was comparing numbers as an average between the M3 and the OG M2.

Originally, i was going to be paying 1250$ a month with 7k down. However with the special financing i am paying just under 900$ a month with 7k down. Im hoping that this car will retain its value almost as good as the OG M2 and be worth about 30k in 3 years. Even if its not, by 5 years i will then owe about 18k as my balloon payment. An equivalent M2/M3 with 60k miles is still about 25-30k depending on area, so i'd come out ahead in that aspect. While this car is my daily driver, I only drive on weekends due to the pandemic. So i fully expect to be at around 48k miles or less in 5 years which should up my value.

I think the balloon option is a good option if you dont plan on keeping the car and hope to break even in a few years to move onto something else. But if you are going to keep the car, then just finance the whole thing. You'll save yourself more money that way.
It's an interesting concept that I can see being appealing for the reasons you listed. I appreciate all the feedback.
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      12-01-2023, 10:30 AM   #8
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It can indeed be a method used to make payments more manageable and even operate like a lease in some ways. The idea of shifting some risk away from the buyer to the bank is quite interesting.
If you're looking for a deeper understanding of how balloon loans work, especially in Europe, you might want to reach out to a Mortgage Broker in Solihull. While they primarily deal with home financing, they might have insights to offer or point you in the right direction for further information.

Last edited by JovanniWest; 12-13-2023 at 03:12 AM..
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