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      08-23-2011, 06:01 PM   #1
sard
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BMW Balloon financing

Do you pay interest on the balloon amount during the life of the loan?
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      08-23-2011, 10:01 PM   #2
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Absolutely. Otherwise BMWFS would be loaning you that money at no interest. They are not going to do that.
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      08-23-2011, 10:03 PM   #3
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Ok. I've read on other forums about this and I guess a lot of people answer without actually knowing. I finally heard back from the finance department at the local BMW dealership. They said you do not pay interest on the balloon portion, but the sales contract I'm looking at certainly doesn't seem to reflect this. I'll have to do more research.
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      08-23-2011, 11:08 PM   #4
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I can't imagine it being interest free... but I'm curious as well, as I'm considering this financing option. Let us know what you find out.
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      08-23-2011, 11:41 PM   #5
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What is the interest on $30,221.39 for 5 years at 4.9% apr? I tried using this website

http://www.bankrate.com/calculators/...alculator.aspx

and it's way lower than what the sales contract actually says...aghhh.
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      08-24-2011, 12:30 AM   #6
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Roughly, it should be close to $3,750 (that would be 5% on an average balance of $15,000 for 5 years) if you're paying the principal down monthly to zero at the end of 5 years. But if the $30K were a balloon, the interest would be twice as much since the average balance and the beginning balance are the same.
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      08-24-2011, 02:27 AM   #7
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The interest paid through the loan is $3,914.49
The monthly payment would be $568.93.
I got the same results as the website gives you.
You can calculate the monthly payment on a balloon loan yourself. It is exactly like a lease. Your monthly payment has 2 parts to it.
1. The amount of the car that you use up. This is the cost of the car less the residual. If you plug this amount into the loan calculator as the amount you borrow and use 5 years and 4.9% that will be the first component of the monthly payment.
2. The interest on the balloon amount. In the case of your loan, the monthly interest is 4.9%/12 (0.4083%). The interest on the balloon amount is
(0.4083%) x (balloon amount).

What are the terms of the balloon loan? (interest rate, term of loan, balloon amount, monthly payment)
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      08-24-2011, 10:28 AM   #8
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Quote:
Originally Posted by richardew View Post
The interest paid through the loan is $3,914.49
The monthly payment would be $568.93.
I got the same results as the website gives you.
You can calculate the monthly payment on a balloon loan yourself. It is exactly like a lease. Your monthly payment has 2 parts to it.
1. The amount of the car that you use up. This is the cost of the car less the residual. If you plug this amount into the loan calculator as the amount you borrow and use 5 years and 4.9% that will be the first component of the monthly payment.
2. The interest on the balloon amount. In the case of your loan, the monthly interest is 4.9%/12 (0.4083%). The interest on the balloon amount is
(0.4083%) x (balloon amount).

What are the terms of the balloon loan? (interest rate, term of loan, balloon amount, monthly payment)
According to the BMW finance department, there is no interest paid on the balloon. That's why I'm getting agitated.

The car comes out to be $56,807.64 after all tax and fees. Downpayment of $5,000. Total amount financed is $51,807.64 (Cost of car - downpayment). It says the balloon payment is $21,586.50. So I'm assuming the only portion that will accrue interest is $35,221.14 (Amount financed - balloon)

So $35,221.14 at 4.9% apr for 5 years is $39,783 or monthly of $663.05. This equals $4,561.86 in interest.

According to the proposed sales contract. The total finance charge is $9,271.11

They have $658.20 as the monthly payment x 60 payments. = $39,491
$39,491 + residual of $21,586.5 = $61,087.5 will be the total I will have paid after interest. This equals $4,270.86 in interest.

But! I have already put down $5,000 as a downpayment. So $5,000 + $61,087.5 = $66,087.5. Take $66,0875.5 - $56,807.64 (initial cost of car) and that is $9279.86 that I have paid in interest??

Am I doing something wrong?
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      08-24-2011, 12:30 PM   #9
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Here is my calculation. They came up with $658.20. My calculation is a $1.13 different, basically the same. As you can see, you are paying $88.14/month interest on the balloon amount no matter what they are telling you. You made one mistake in your calculatons. The amount that you are financing is the msrp - down payment - balloon. You forgot the $5000 down payment.
msrp $56,807.64
down payment $5,000.00
msrp - down pmt $51,807.64
ballloon $21,586.50
amount financed $30,221.14
rate 4.90%
term 5

payment on amount financed $568.93
interest on balloon $88.14
total payment $657.07
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      08-24-2011, 03:27 PM   #10
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How can she tell me straight up. No interest on the balloon. Ive had other bmw dealers say the same thing
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      08-24-2011, 05:34 PM   #11
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Perhaps they don't understand finance. They sell cars. You can show them the calculations, or better yet, get them to agree not to charge interest on the balloon amount in writing.
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      08-26-2011, 06:45 AM   #12
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Quote:
Originally Posted by richardew View Post
Perhaps they don't understand finance. They sell cars. You can show them the calculations, or better yet, get them to agree not to charge interest on the balloon amount in writing.
You of course have to pay interest on the balloon amount, otherwise might as well get a 100% balloon payment lol. They might try to argue you pay interest on the full purchase price of the car and then pay what you still owe as a balloon payment, the end result is the same. A balloon payment is similar to an interest only loan or a lease. Usually all ways to live beyond your means. They can still be a good option compared to leasing though.
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      08-26-2011, 10:30 PM   #13
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In the end I went with a loan from my auto insurance State Farm which had better rates anyways.

I asked my CA if I can go in this weekend and talk to someone in finance to go over the numbers with me since I will be picking it up late Monday night (it's Friday right now) and want to get in and out ASAP. Here's her response, "Well no, well yes, someone will be here in financing, but they're much too busy to go over it with you."

Hahahhaa... such fuckers. After numerous emails back and forth with both my CA and the Finance department with my breakdown of the loan, they're unable to give me any useful information why the fuck I would pay 9k in interest if they're telling me there's no tax on the balloon portion (which is determined by the estimated residual amount on the car at the end of the loan).

All they could say was, well there's the sales contract, we have lawyers that design them and I'm sure they're accurate. So I guess the people in their finance department might be a couple of monkeys who simply plug in your vehicle cost and let their program spit out the sales contract with no idea what's going on.
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      08-27-2011, 06:30 PM   #14
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jon! I'm getting an x3 too! paul told me about yours haha enjoy it!
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      08-27-2011, 07:33 PM   #15
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Quote:
Originally Posted by chrisE92 View Post
jon! I'm getting an x3 too! paul told me about yours haha enjoy it!
LoL right on!
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      08-27-2011, 08:00 PM   #16
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Quote:
Originally Posted by sard View Post
In the end I went with a loan from my auto insurance State Farm which had better rates anyways.

I asked my CA if I can go in this weekend and talk to someone in finance to go over the numbers with me since I will be picking it up late Monday night (it's Friday right now) and want to get in and out ASAP. Here's her response, "Well no, well yes, someone will be here in financing, but they're much too busy to go over it with you."

Hahahhaa... such fuckers. After numerous emails back and forth with both my CA and the Finance department with my breakdown of the loan, they're unable to give me any useful information why the fuck I would pay 9k in interest if they're telling me there's no tax on the balloon portion (which is determined by the estimated residual amount on the car at the end of the loan).

All they could say was, well there's the sales contract, we have lawyers that design them and I'm sure they're accurate. So I guess the people in their finance department might be a couple of monkeys who simply plug in your vehicle cost and let their program spit out the sales contract with no idea what's going on.
If you decided to finance and buy your X3, PenFed has the lowest rates at 2.9%. Anyone can use them (even if you don't have a military or government connection). If it is not too late, you may want to check them out.
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      08-27-2011, 08:02 PM   #17
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Quote:
Originally Posted by Want the thrill View Post
If you decided to finance and buy your X3, PenFed has the lowest rates at 2.9%. Anyone can use them (even if you don't have a military or government connection). If it is not too late, you may want to check them out.
Thanks for the tip. I have already decided to go with my auto insurance, State Farm. It's at 2.99% and they add in gap insurance for free.
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      08-27-2011, 08:10 PM   #18
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Thanks for the tip. I have already decided to go with my auto insurance, State Farm. It's at 2.99% and they add in gap insurance for free.
Actually, Penfed is 2.49 (I mistyped). State Farm is pretty close so it wouldn't save you that much more. I used Penfed and they were a breeze to work with. Be sure to share pics when you pic her up!!
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      08-27-2011, 08:19 PM   #19
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Thanks =D And ooh yeah, there will be lots of pics. 2 more days!!!
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      08-13-2012, 08:53 PM   #20
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Quote:
Originally Posted by sard View Post
Do you pay interest on the balloon amount during the life of the loan?
During the life of the loan yes. However, the balloon is like putting a larger down payment, just on the back end of the loan. How could they get away with charging you interest on a down payment?
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