BMW ballon loan - worth it?

R0CKY

BMW do a fixed price monthly deal on new cars. You pay a few thousand pounds up front, then a fixed monthly sum (around £300) for a 3 year period.

At the end of the period you can choose to return the car and take out another similar deal, or decide to buy the car buy paying a pre-agreed sum.

If anyone has knowledge or experience of this type of deal (I think it's called a balloon load elsewhere), I'd be interested to hear your opinions.

To me it seems good value because you get a brand new car with no MOT or unexpected large maintenance bills to worry about it, and you don't need a large intial outlay.

If I was to compare that against taking a loan out on a car of say for example even half of the value of a new BMW, I'd have a large initial outlay and also maintenance costs to consider.

It looks good value on the face of it, and looking around, very popular.

Thoughts?

sdooley

The alternative is leasing, which might be cheaper and doesn't need any up-front sum. Can also be tax-deductible if you're self-employed.

jimpix12

I have never seen the point in leasing, if I leased the car I'm looking to buy, it will save me all of £10 a month vs. 4 year loan. if I clear the loan early -heck even if I let it run its course- I'll have the car to sell. It does work out cheaper leasing but is it worth it at the end?

R0CKY

I'm not interested in leasing, the question is about BMW finance deals.

Zapp_from_Planet_Zogg

There is such a thing as Lease Purchase you know (it isn't leasing as you would expect - it is more like a conventional Hire Purchase arrangement). With lease purchase, you can pay whatever level of deposit you like but still have the balloon payment at the end.

In any case, I don't think that BMW Finance offer Lease Purchase schemes any more.

Standard PCP deals with a balloon payment are fine, so long as they are regulated agreements and you can hand the car back at the end without penalty and you don't exceed the agreed mileage.

With all balloon deals there is a substantial risk that the car wont be worth the balloon payment at the end of the deal. If the agreement is regulated and you have paid half of the total value of finance back, you can walk away. If it isnt, or you havent paid enough off, you are stuck with a lump of negative equity.

In general, they are a good way of getting in to a new or newish car.

Also be aware that you don't have to have BMW finance to buy a BMW from a BMW dealer. You can get finance from anywhere and better rates may be on offer elsewhere. The dealers business manager can arrange finance from other sources for you. (One of the best general rates at the moment is GE Capital - around 8.5% APR).