BMW 50/50 Deal

spinks

My DH is a member of the armed forces in Germany and as such is entitled to purchase vehicles tax free.

We have been offered a deal to buy a BMW on a 50/50 scheme whereby we pay 50% of the cost of the car on day one to get a brand new car then in 12 months time we can change the car for a brand new one and pay the remaining 50% of the cost of the car.

After the next 12 months we can hand the car back and they will refund us the full amount of the car that we have paid. Basically this is sold as 2 yrs free motoring.

This deal seems too good to be true. Any thoughts or experiences anybody may wish to share much appreciated.

in2deep_2

The remaining 50% you pay after 12months will be more than 50% of its value due to the depreciation after the 12months.

Does that make any sence..!?!?!?!?!?!?

in2deep_2

Having put my brain into gear i suppose the depreciation is the same even if you buy outright and sell after 12months.....Duh.!:o

Hintza

I have been struggling to get my head round this one. Who is providing the finance? Danger of company going bust?

AdrianHi

There is absolutely no way any BMW under £40K-£50K list price will loose as much as 50% of it's value in one year unless you put something like 100,000 miles on it.
A base specification 520d SE is projected to retain 55% of it's value at 36 months and 36,000 miles. Most people will add extras like leather, auto and media pack (sat. nav. + CD changer) to this which makes the real world residual on a realistic spec. 520d SE more like 50% at 36 months and 36,000 miles.

The reason I can see this working ispartly tax avoidance. The depreciation on a car like this is easily low enough to be equal to the VAT which you don't have to pay + realistic discount (10%) . In the UK used market these cars will certainly sell on at more than list price minus the VAT and discount (total of about 27%) when they are 1 year old. I think it is a good deal for BMW.
For you it's a pretty good deal because it only costs you lost interest on your 50% then 50% more over the 2 years. If you put in 2 x 15K that's somewhere around £2000-£3000 or if you have to borrow the money what ever the interest charges are. If you get finance from BMW financial services BMW make money on that and any GAP insurance they manage to flog to you (don't get GAP, get RTI).
Another part of the reason this works for BMW is it costs them a lot less than list price to produce the car (of course!!!) so there is still a profit margin for them here too.
I think it is a pretty good deal for you, you would have to drive a 6 year old car that's not depreciating to get near that kind of cost of motoring. I think the real catch for you comes when you hand the car back in 2 years time. You will not want to be driving a Vauxhall Vectra or similar come that time, you will probably be eyeing up a new shape 5 series or similar. Then it gets expensive
Best way to own BMW's IMO is in the 6 to 36 month old range, get rid of the worst of the early depreciation, move the car on when warranty expires and running costs increase (MOT, more expensive later services etc.) but depreciation does not decrease by much.