# BMW Select - Program Overview



## ericas75 (Jan 13, 2009)

Can someone give me some background on the BMW Select program i.e. pros and cons? One dealer sppent an hour trying to talk me into it while another has casually said it's not a good value but she doesn't have a lot of info to back up that statement.

My understanding is that the program is basically a buying program with some of the advantages of leasing like lower monthly payments. Much of the cost is deferred into the balloon payment which you can choose to pay and buy the car outright or use the equity in the car for a trade-in or sale to a private buyer.

I appreciate any info you can share. It seems like a pretty good deal to me as long as you're putting the savings from monthly payments into a higher yielding investment. I'm not sure whether my current CA is blowing it off out of ignorance or some hidden agenda.


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## SARAFIL (Feb 19, 2003)

The problem that some people have with the select is that at the end you have equity... only that it is *negative*.

A select can be a good idea if you go into it knowing what it is.

1. It is a simple interest loan, so you can pre-pay just like a regular loan.

2. The balloon is fixed upfront, but can go down if you pay extra each month.

3. Your options at the end are:
a. pay if off cash
b. refinance it 
c. pay it off through by trading it in or selling it... only thing you have to consider here is your sale price/trade in value relative to your balloon payment

4. You pay all the tax upfront and the car is registered and titled in your name, so there is no sales tax on the balloon payment and you do get a sales tax credit when you trade the car in (if your state does this).

5. You can trade it in before the balloon payment is due, you would just have to get the payoff from the bank. It will be higher that what it would have been on a conventional finance.

6. *The big one:* Pay attention to the interest rate. You can pay alot more interest on a select since you are paying down less principal and you are carrying the balloon balance until the end. The standard rate for a Select is higher than a regular loan. *However, when BMW does special financing offers like 0.9%, 1.9%, 2.9% these often do apply for a Select which makes the numbers much better.*


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## Robert A (May 18, 2003)

Sarafil: With BMW Select, is the buyer financial responsible for negative equity at the end of the term?


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## SARAFIL (Feb 19, 2003)

Robert A said:


> Sarafil: With BMW Select, is the buyer financial responsible for negative equity at the end of the term?


Yes, whatever the balloon is, you are responsible... it does not matter what the value of the car is. There is no "walk away" option and you are obligated to that final payment. It also can not be negotiated like a lease residual. The only way it would be lower is if you had made extra principal payments during the term of the loan.

Many years ago, BMW was using balloon values that were close to the lease residuals and many people were coming back with negative equity. In the past 2 years, I have seen BMW significantly drop their balloon values to the point that they are now usually 5-10% less than a comparable term lease residual. It does result in a higher monthly payment, but the increased focus on low-APR financing (which was not offered before on the Select program) has offset this to keep the payments reasonable.


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## Robert A (May 18, 2003)

Sarafil, for some reason I thought that BMW Select was primarily designed as a substitute for traditional leasing in those states that had peculiar sales tax laws. Putting the buyer on the hook sounds like a recipe for disaster.


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## JW_BMW (Oct 3, 2007)

Robert A said:


> Sarafil, for some reason I thought that BMW Select was primarily designed as a substitute for traditional leasing in those states that had peculiar sales tax laws. Putting the buyer on the hook sounds like a recipe for disaster.


You are referring to BMW's Owners Choice program not BMW Select.


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## Robert A (May 18, 2003)

Got it -- I did have the two programs confused. So, how does BMW's Owner's Choice work? Or, more specifically, how is the balloon determined, and do the interest rates mirror those offered with traditional BMWFS financing?


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## ericas75 (Jan 13, 2009)

My intent is actually to buy and own my car for the long-term (at least 5-7 years), so I'm less worried about negative equity or not being able to walkaway from the balloon payment. Let's assume the current financing rate of 2.9% holds for traditional financing as well as BMW select.

Is interest incurred on the balloon payment over the course of the loan or is it deducted from the interest calculation? If there's no interest on the balloon, it seems very similar to moving a 2nd down payment to the end of the loan term.

Then that would mean a lower down payment up front while still maintaining lower monthly payments over the loan term relative to traditional financing. It seems like the total cost (including balloon payment) is lower over the life of the loan, right?


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## 02fireman (May 29, 2008)

I haven't signed the final papers since my car has not arrived but the interest on the balloon is a good question. I know it is a set amount based on downpayment and interest amount but I need to ask whether or not the balloon includes built-in interest.


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## SARAFIL (Feb 19, 2003)

You *are* paying interest on the balloon, but fortunately with 2.9% rate it is not alot. BMW is loaning you that money for whatever length your loan is, so it is fair that they would collect interest on it. Also, on a loan your interest is calculated on the outstanding principal balance, so if it is not being paid until the end it will always be accruing interest.

If you google "amortization calculator with balloon" you should find some calculators that will let you plug in your amount financed, balloon and rate and see what the difference is in the interest.


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## SARAFIL (Feb 19, 2003)

02fireman said:


> I haven't signed the final papers since my car has not arrived but the interest on the balloon is a good question. I know it is a set amount based on downpayment and interest amount but I need to ask whether or not the balloon includes built-in interest.


The balloon is based only on the MSRP of the car and the term... it is a percentage of the MSRP. Your down payment and rate do not affect the balloon. There is no interest built into the balloon either.


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## SandNs new 528 (May 7, 2008)

Sarafil,is it possible to find charts on the Select program to see rates & residuals. Select sounds similar to an open end lease which has worked well for me in the past PROVIDING the residuals are low enough at the term. Thanks for your help.


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## MikeCee (Apr 3, 2007)

SandNs new 528 said:


> Sarafil,is it possible to find charts on the Select program to see rates & residuals. Select sounds similar to an open end lease which has worked well for me in the past PROVIDING the residuals are low enough at the term. Thanks for your help.


You can make the balloon as low as you would like.


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## SandNs new 528 (May 7, 2008)

MikeCee said:


> You can make the balloon as low as you would like.


Understood - how can I determine what the current going rate is for "select". Thanksl


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## Jever (Apr 16, 2003)

bump


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## FallsT (Sep 10, 2015)

http://www.bmw.ie/en/topics/owners/...ancing-your-bmw/bmw-select--pcp--finance.html


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## LycanNyc (Apr 11, 2012)

Well BMW Select might not be so bad after all... For ex, Traditional Finance you pay upfront (tax) too and it depreciates just like any other car. With BMW Select you can trade/sell your car off any time and not having a huge monthly like Finance is not bad. Most of the time there's not a winning situation when you own a car bought from the dealer.


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## FallsT (Sep 10, 2015)

LycanNyc said:


> Well BMW Select might not be so bad after all... For ex, Traditional Finance you pay upfront (tax) too and it depreciates just like any other car. With BMW Select you can trade/sell your car off any time and not having a huge monthly like Finance is not bad. Most of the time there's not a winning situation when you own a car bought from the dealer.


I think it comes down to whether you will be in a good financial situation down the road where you can afford the balloon payment. If not, either finance (if you can afford it) and keep the value of the car for further trade-in or lease for a low payment but own nothing.


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## LycanNyc (Apr 11, 2012)

Correct me if I'm wrong since I'm just trying to understand this balloon payment. I have a friend that has done it in his last 3 cars (he doesn't keep them for 60 months either and finds the lease contract not to fit him)

- Balloon/BMW Select is the same as financing (uses same APR rates i think) 
- Lease/Lower payments a month (could do 36 months or even 60 months) 
- Allows you to enjoy a car, no mileage limit 
- no MSDs 
- tax upfront on the full value 

Now my question is, the balloon payment at the end is it like a residual value or is it sum at the end ? 
For ex, what if the residual value of the car (lease) is higher than what the car/market/value is in 36 months ? 
What if the balloon payment of the car at the end of the term is lower than a residual value or current market price? 

Thanks


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## TXPearl (Apr 16, 2010)

Higher or lower, you owe the balloon balance. There is no residual value protection like a lease or Owners Choice.


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## Ninong (May 20, 2014)

LycanNyc said:


> Correct me if I'm wrong since I'm just trying to understand this balloon payment. I have a friend that has done it in his last 3 cars (he doesn't keep them for 60 months either and finds the lease contract not to fit him)
> 
> - Balloon/BMW Select is the same as financing (uses same APR rates i think)


Both BMW Select and Owner's Choice are conventional finance contracts but with low lease-like payments because of the balloon payment at the end. The main difference between BMW Select is that it doesn't offer you the option to walk away from the car when the balloon payment comes due like Owner's Choice does, which is why they don't care how many miles you put on the car. Owner's Choice is available in Illinois, Texas and Georgia only. I don't understand why they're still offering it in Illinois since that state fixed the way it charges use taxes on leases effective Jan. 1, 2015 -- a year ago. It's really only Texas and Georgia that still totally screw lease customers.

BMW Select is a regular loan but with the last payment being a big balloon payment. You can pay the balloon payment and keep the car or you can refinance the balloon payment as a used car loan or you can trade the car in. One of the biggest drawbacks, and why no one should really consider BMW Select in my opinion, is that you're never going to benefit from one of BMW's lease pull-ahead offers. Because you don't have a lease. You have a finance contract.

The APR on BMW Select is whatever BMWFS is offering at the time but it may be slightly higher than the APR on other conventional finance contracts, _and_ the dealer is allowed to mark up the rate a little to earn a few extra bucks on the deal after you beat him to death on the front end. 



> Now my question is, the balloon payment at the end is it like a residual value or is it sum at the end ?


The total of the regular monthly payments and the last payment (called the balloon payment) equals the total balance due on your loan after your down payment (if any). You're paying interest on that total amount during the term of your contract, just as you would be paying a "rental charge" on the total amount of the net cap cost plus the residual on a lease. It's called "interest" on a loan and "rental charge" on a lease but it's basically the same thing.



> For ex, what if the residual value of the car (lease) is higher than what the car/market/value is in 36 months ?


Congratulations, you still own it. I would say "you have a firm grip on it." 



> What if the balloon payment of the car at the end of the term is lower than a residual value or current market price?


See previous response.



P.S. -- If it's a lease, it's titled: 
BMW Financial Services -- Lessor
Your Name -- Lessee

BMW Financial Services, Lienholder

If it's a loan, it's titled:

Your name

BMW Financial Services, Lienholder

In other words, you're the registered owner on a loan and BMWFS is the lienholder and legal owner until you pay off the loan in full. If it's a lease, BMWFS is the registered lessor and you're the lessee (renter) and BMWFS is the lienholder and legal owner. If you want to own the car at the end of the lease, you have to purchase it for the agreed upon price. If you want to own the car at the end of any kind of conventional finance contract all you have to do is pay it off -- you're already the registered owner of the car but not the legal owner until you finish paying all of the payments on it.


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## LycanNyc (Apr 11, 2012)

Ninong, always with the answers! thank you 

So if I got a bmw select right now and decided to sell the car in 2yrs before my 60 month term.. isn't it the same if I were to finance the car with at traditional finance and sell the car? 
Except with the select I have lower payments and keeping more money in my pocket ? 

Financing (NEW) will cost too much each month
Leasing depending on model and options will have you with higher payments too, mileage limit and over mileage has increased =\


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## FallsT (Sep 10, 2015)

All this headache of deciding is why I found a gem on the CPO lot and bought it as a traditional finance with low "lease-like" payments but I own it at the end.


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## LycanNyc (Apr 11, 2012)

TXPearl said:


> Higher or lower, you owe the balloon balance. There is no residual value protection like a lease or Owners Choice.





FallsT said:


> All this headache of deciding is why I found a gem on the CPO lot and bought it as a traditional finance with low "lease-like" payments but I own it at the end.


Sure its a 2012/328

But in this case we're referring to cars BRAND NEW and that we can't afford right away.. 
55-70k price range

I currently bought traditional finance thru CreditUnion my 59k msrp car, for 44k out the door with 11,000 miles (a few months old) CPO Elite =D


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## Ninong (May 20, 2014)

LycanNyc said:


> So if I got a bmw select right now and decided to sell the car in 2yrs before my 60 month term.. isn't it the same if I were to finance the car with at traditional finance and sell the car? Except with the select I have lower payments and keeping more money in my pocket ?


As with a traditional finance contract, all you have to do is call BMWFS for your current 10-day payoff. That's what it will take to clear the title. If you're selling the car, then typically it's the guy who is purchasing the car from you who is interested in paying off the balance due on the loan to make sure it's going to be his. In other words, if he has agreed to buy it from you at a purchase price that is higher than what you still owe on it, then he would give you a check for the difference between the payoff amount and the agreed upon selling price and you would give him a bill of sale and an authorization for payoff so that he can pay BMWFS directly and they will send him the title and not you. It's that authorization for payoff that you signed that gives him the legal right to do that and allows BMWFS to send him the title.

All of that is done very carefully and quite often through a neutral third party service. Either that or you both deal with BMWFS so that both of you are satisfied that neither one of you will be left holding the bag. All of that assumes the new buyer is paying cash for the car. If he's financing it, then his credit union or bank may offer to arrange all of this stuff for you guys since they will want to be named on the authorization for payoff so that they can pay off BMWFS and get the title registered with them as the new lienholder/legal owner and the new buyer as the registered owner.

Now, if this works out the way most of these deals do, the new buyer won't be giving you anything because your payoff will be higher than what he has agreed to pay you for the car. In a situation like that, you have to give him a check payable to him for the difference between the payoff and the amount you still owe. In other words, you have negative equity.


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## LycanNyc (Apr 11, 2012)

Ninong said:


> As with a traditional finance contract, all you have to do is call BMWFS for your current 10-day payoff. That's what it will take to clear the title. If you're selling the car, then typically it's the guy who is purchasing the car from you who is interested in paying off the balance due on the loan to make sure it's going to be his. In other words, if he has agreed to buy it from you at a purchase price that is higher than what you still owe on it, then he would give you a check for the difference between the payoff amount and the agreed upon selling price and you would give him a bill of sale and an authorization for payoff so that he can pay BMWFS directly and they will send him the title and not you. It's that authorization for payoff that you signed that gives him the legal right to do that and allows BMWFS to send him the title.
> 
> All of that is done very carefully and quite often through a neutral third party service. Either that or you both deal with BMWFS so that both of you are satisfied that neither one of you will be left holding the bag. All of that assumes the new buyer is paying cash for the car. If he's financing it, then his credit union or bank may offer to arrange all of this stuff for you guys since they will want to be named on the authorization for payoff so that they can pay off BMWFS and get the title registered with them as the new lienholder/legal owner and the new buyer as the registered owner.
> 
> Now, if this works out the way most of these deals do, the new buyer won't be giving you anything because your payoff will be higher than what he has agreed to pay you for the car. In a situation like that, you have to give him a check payable to him for the difference between the payoff and the amount you still owe. In other words, you have negative equity.


thank you 

I'm currently financing my car thru Credit Union and most ppl who are trying to buy my car right now are going through a bank as well. So I've negotiated X but I know its a little profit over what I currently owe. Will they ever see the amount I really owe?

Everytime I go appraise my car at the Dealership they ask me what I owe on my car, why is that? Do they want to low ball me or not give me anything more than what I owe?

Since its not BMWFS, they don't have the right to call my credit union and find out right? Lets say, I owe 25k, dealer offers 29k (i like it) and accept it.. Do I get the check or how does it work?

Thanks


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## Ninong (May 20, 2014)

LycanNyc said:


> I'm currently financing my car thru Credit Union and most ppl who are trying to buy my car right now are going through a bank as well. So I've negotiated X but I know its a little profit over what I currently owe. Will they ever see the amount I really owe?


If you are selling the car to them for more than the current payoff, then they will have to write a check to you for the amount over the payoff. That automatically tells them the exact amount you owe on it.

Anyway, let the bank or credit union handle everything for you guys but just realize that there is no way you can prevent the buyer from finding out the exact payoff owed to the current lienholder on the car he is buying.



> Every time I go appraise my car at the Dealership they ask me what I owe on my car, why is that?


Because they need to know if you have equity in your car or if you're upside down by thousands. They need to know if your situation is hopeless and they're beating their heads against a brink wall trying to turn this into a deal. 



> Since its not BMWFS, they don't have the right to call my credit union and find out right?


They have every right to get a payoff on a trade-in that is part of a deal they are working with you unless you refuse to sign the credit app and specifically refuse to give them permission to call for a payoff. By the way, they don't need to call for a payoff until the deal is getting its final finishing touches because simply signing that credit app gives them permission to pull your credit and that tells them how much your current balance is on that account. Don't you realize that once you sign that credit app they're going to know absolutely everything about you, including the amount you owe on your trade-in? They might even know stuff you didn't know, or forgot. They will know everything about all of your current accounts as well as your previous accounts, going back for the past 10 years or more.

Your open credit cards show a date opened, so that's helpful in dating your file once all your previous car loans and leases and home mortgages drop off -- they drop off 10 years after they were paid in full. Once they drop off, your credit score goes down some because you no longer have comparable credit. Of course, you reach a certain age when you really don't have anything in your file other than a few open credit cards.  At that point it's good to have at least one credit card that was opened 40 or 50 years ago and that you never cancelled because that account then becomes the age of your file. So don't get mad and cancel your oldest credit card just because they changed their fees or something. 

They absolutely need an exact 10-day payoff on any car they are taking in trade as part of a deal. If you're doing this on the weekend and they are unable to call for an exact payoff, they will have to use an estimated payoff but then you're on the hook for making up the difference Monday once they do get the exact payoff, assuming it's higher than the estimate. If the payoff is much lower, they will probably need to retype the contract. They could send you a check for the difference, assuming it's not too great. If it's a big difference, they will simply retype the paperwork. They could retype the paperwork if you owe a lot more but typically they simply hit you up for the difference since that is what you agreed to when you signed at that stuff you didn't read.


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## LycanNyc (Apr 11, 2012)

Ninong said:


> If you are selling the car to them for more than the current payoff, then they will have to write a check to you for the amount over the payoff. That automatically tells them the exact amount you owe on it.
> 
> Anyway, let the bank or credit union handle everything for you guys but just realize that there is no way you can prevent the buyer from finding out the exact payoff owed to the current lienholder on the car he is buying.
> 
> ...


thank you  good thing i didn't sign any papers or credit app yet.

So my last question is, if i say i owe 25k and they only give me 20 or 25k (example) instead of saying i owe 2-4k more so they say oh ok we'll give you 29k for your car?


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## Ninong (May 20, 2014)

LycanNyc said:


> So my last question is, if i say i owe 25k and they only give me 20 or 25k (example) instead of saying i owe 2-4k more so they say oh ok we'll give you 29k for your car?


How much you owe on your trade-in has absolutely nothing to do with how much they give you for it. Those are two different things entirely. They don't need you to tell them how much you owe on it anyway. If you don't want to tell them -- for some strange reason -- then don't. What difference does it make? None. If you feel uncomfortable telling them how much you owe, just say "I'm not sure" and leave it at that.

Just remember that they can't work the deal or give you any sort of a quote if you're including a trade-in as part of the deal but they don't have the slightest idea how much you owe on it, if anything. How much you owe on your trade is an integral part of the new deal.

There are some customers who have a trade-in but they tell the salesperson that they don't. Those customers feels insecure in their ability to negotiate a deal with the salesperson so they tell him they have no trade. Then, after all of the numbers are finalized and agreed upon, they spring the trade. They think that's clever. Who cares? You want to know who doesn't care? The used car manager who appraises the trade. You want to know who else doesn't care? The sales manager who approves the deal. All this means is that the customer is going to get the actual value of his trade-in. If he doesn't like it, he can take a hike. It's as simple as that. There won't be any of that padding the trade-in by a thousand bucks just to make the customer feel better, since it's a known fact that all customers think their trades are worth more than they really are.

Those are just the facts. They don't care how much you owe on your trade. They do need to know that if you want them to give you a quote that includes your trade but otherwise they couldn't care less how much you owe on it. The salesperson would like to know how much you owe on your trade so that he will know if this is an exercise in futility because you owe more than your car is worth and you're not willing to throw a few thousand into the mix to make it work. 

As far as signing the credit app is concerned, most sales managers would refuse to work the deal at all without a signed credit app unless they already know the customer.


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## LycanNyc (Apr 11, 2012)

Ninong said:


> How much you owe on your trade-in has absolutely nothing to do with how much they give you for it. Those are two different things entirely. They don't need you to tell them how much you owe on it anyway. If you don't want to tell them -- for some strange reason -- then don't. What difference does it make? None. If you feel uncomfortable telling them how much you owe, just say "I'm not sure" and leave it at that.
> 
> Just remember that they can't work the deal or give you any sort of a quote if you're including a trade-in as part of the deal but they don't have the slightest idea how much you owe on it, if anything. How much you owe on your trade is an integral part of the new deal.
> 
> ...


I thought they did care since 1 particular MB dealership said couldn't give me trade-in $$ unless they knew how much I owed.

When the lease programs are bad for ex. RV 55-59% isn't it better to do BMW Select or Financing.


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## Ninong (May 20, 2014)

LycanNyc said:


> I thought they did care since 1 particular MB dealership said couldn't give me trade-in $$ unless they knew how much I owed.


Haha! Why didn't you tell them you didn't owe anything? Just make sure they don't ask to see your current registration. 

Let me let you in on a little clue here. Nobody is going to get serious about desking this deal if they don't already have a signed credit app. The salesperson (client advisor) can tell you anything he pleases but he can't approve the deal. He needs a manager to approve the deal. If it's a cash deal most dealerships will let you slide without a signed credit app, assuming your bank is open at the time so that they can verify funds in your checking account if you're paying with a personal check. But even that is not foolproof because the customer can take delivery and then drive straight to the bank and withdraw all of those funds and skip town.

If the salesperson tells his manager that he's working a lease or a finance contract, then the manager will ask him for the signed credit app. Once you sign the credit app, you have given them permission to pull your credit. Once they pull your credit, they know absolutely everything they need to know about you and about how much you owe on your trade. What happens if the salesperson tells his manager that it's a lease but he doesn't yet have a signed credit app? His manager tells him to go back and get the signed credit app. Period. It's that simple. Unless you're a repeat customer and they know you, they're not going to work the deal at all without a signed credit app. 



> When the lease programs are bad for ex. RV 55-59% isn't it better to do BMW Select or Financing.


That's entirely up to you. Why are lease programs "bad" because the residuals are realistic? What you have to do is look at all of the various financing options available to you and then make your decision based on what makes the most sense for you. Just remember that if you want to take advantage on any possible future lease pull-ahead programs, you have to have a lease. No one can tell you which payment option is better for you because that's something each individual has to determine. Just as no one can tell you which color is best or which model is best.


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## LycanNyc (Apr 11, 2012)

Ninong said:


> Haha! Why didn't you tell them you didn't owe anything? Just make sure they don't ask to see your current registration.
> 
> Let me let you in on a little clue here. Nobody is going to get serious about desking this deal if they don't already have a signed credit app. The salesperson (client advisor) can tell you anything he pleases but he can't approve the deal. He needs a manager to approve the deal. If it's a cash deal most dealerships will let you slide without a signed credit app, assuming your bank is open at the time so that they can verify funds in your checking account if you're paying with a personal check. But even that is not foolproof because the customer can take delivery and then drive straight to the bank and withdraw all of those funds and skip town.
> 
> ...


Wish you were my neighbor  you know all the answers thank you !

Quoted from my CreditUnion



> Payment Saver Auto Loans:
> 
> How It Works
> 
> ...


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## Shon528 (Oct 3, 2003)

Would anyone know the residual percentage that would be used if doing select financing on a '16 328xd wagon or a '16 328xi GT. Looking at a few demo and loaner vehicles with approx 5k miles. One in particular is $9k off of MSRP. Tossing the idea of a 3rd car in the house to keep a lil longer than our usual 3 year leases.


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## tturedraider (Nov 11, 2005)

Shon528 said:


> Would anyone know the residual percentage that would be used if doing select financing on a '16 328xd wagon or a '16 328xi GT. Looking at a few demo and loaner vehicles with approx 5k miles. One in particular is $9k off of MSRP. Tossing the idea of a 3rd car in the house to keep a lil longer than our usual 3 year leases.


Those residual amounts are not readily available since Select is not often used. You'll pretty much have to get them from the dealer.


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## Shon528 (Oct 3, 2003)

tturedraider said:


> Those residual amounts are not readily available since Select is not often used. You'll pretty much have to get them from the dealer.


I'll reach out to him on that then. Also looking to find out if Select is available to do on CPO cars as well. As in not a loaner or demo, but perhaps like a '14 w/ >20k miles on it. I have this crazy idea of getting my hands on a 328 m-sport diesel wagon or a 328 GT, also m-sport. As a 3rd car in the house, something that has some utility practicality to it, keep it for 5-6 years, and that can be had for short money.


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