Believe it or not there are still people out there that pay for their cars outright without finance. However with the rising price of top end BMW's it can be a daunting prospect to hand over a £60k cheque for that new M3 or a cheque for £70k+ for a new 6 series. To soften the blow BMW have come up with a new finance scheme they call BMW 50:50 Select.
The 50:50 Select scheme is a variation on the balloon payment scheme. With a balloon scheme, buyers finance maybe 60% of the car and make monthly payments on that 60% only. After an agreed time period, say 2 or 3 years, they then have the option to pay the balance as a balloon payment or simply hand the car back.
BMW 50:50 is designed for the cash rich, so there are no monthly payments. The first payment covers 50% of the value of the car and the second payment is made 24 months later and covers the remaining 50% of the balance. So 50% of the value of the car is financed, but at 0% APR there is no interest to pay.
Final payment options
At the end of the 24 month period you have 3 options;
- Keep your car - To keep the car just pay the 50% balance
- Update your car - choose a new car and if the old car is worth more than 50% of its original value, use the excess as a deposit on the new car
- Return your car - Simply hand the keys back and pay no more
Example - BMW 650i SE Convertible
If we look at a working example, using the new BMW 6 series. This car would typically be priced at £77k after some options were added. Let's assume that the buyer also has an old 650i cab to trade in against the new car.
50% of balance - £38.5k
Trade in value for your old car - £25k
First payment - £13.5k
Final payment - £38.5k
The example does not take into account any discounts. So realistically you could shave maybe a thousand or two off both the first and second payments.
Given the option of writing a cheque for £13k versus writing a cheque for £77k, most people would take the first option. This could make BMW 50:50 Select very popular indeed.
Currently this offer is limited to the higher end models only, eg. the 6 series, 730d SE/M Sport, M3 Coupe and Convertible, X5 30/40d and the X6 30d/40d
From what we know there doesn't seem to be many special conditions for this package. If you decide to hand the car back, it will need to be in good condition and should not have exceeded the 20,000 mileage limit. As with almost all guaranteed future values, the GFV is also dependant on the mileage limits.
If you have the cash for a new car, BMW 50:50 select looks like a no brainer. If you already had the money to pay for the car outright, 50:50 allows you to hang on to half your cash for 2 years, investing it, or using it for other things.
However when it comes to doing the deal, you need to make sure that you get the same trade-in value for your old car and the same discount that you would do with the cash deal.
Dealers can offer large discounts on new cars, only to recoup that money by offering you a lower price for your old car. You need to work out the true 'cost to change' when paying with cash and compare that with the 50:50 deal. If the 50:50 deal is more expensive then that is the hidden costs of the finance.
It could be that there are no drawbacks to this scheme. If BMW sell more top end cars as a result of offering the 50:50 deal, they won't need to rely on hidden costs and expensive finance packages.