BMW is synonymous with refined luxury and performance vehicles, offering everything from sporty coupes to go-anywhere SUVs. If you’re looking to buy a car from the marque that promotes itself as “The Ultimate Driving Machine”, and you need help to cover the full purchase price, you’ll need to consider the wide range of finance plans available.
Let’s take a closer look at a selection of BMW finance options to help you work out which one is right for you.
There are several types of finance available if you want to buy a new BMW:
Car loan. Also referred to as a secured loan, a car loan allows you to borrow the money you need to cover the purchase price of your new BMW. These loans are available with fixed or variable interest rates, while the car is offered as collateral for the loan.
Unsecured loan.An unsecured loan is almost identical to a regular car loan but with one important difference: you don’t need to offer the car as security. As a result, unsecured loans have higher interest rates than secured car loans.
Novated lease. A novated lease is a salary sacrifice arrangement you can set up with your employer. Under this type of agreement, you lease a car and your employer covers the lease repayments directly from your pre-tax income. You then have the option to buy the car outright at the end of the lease. This can be a tax-effective way to purchase a car, but if the car you buy depreciates in value more than expected then you could end up out of pocket.
Car lease. Under this type of arrangement, the financier purchases a vehicle on your behalf and then leases it back to you. You’re required to make monthly payments throughout the lease term, with the option to purchase the car outright at the end of the term. Fixed repayments mean you have the security of knowing how much your finance will cost, while the fact that the lease is secured against the vehicle means that you can access lower interest rates.
Chattel mortgage. A chattel mortgage is a commercial finance arrangement where a financier lends you the money you need to purchase a new car, and you take ownership of that car straight away. The financier then places a mortgage on the vehicle so that it becomes security for the loan. An optional lump-sum balloon payment at the end of the loan term allows you to tailor repayments to suit your budget.
Dealer finance. Another option commonly used by new car buyers is to obtain finance from the car dealer. This is undoubtedly a convenient option and regular discounts or promotional offers mean you may be able to find a good deal. However, dealer finance will usually end up being more expensive than a secured car loan, and you also need to consider whether there’s a large balloon payment – a lump sum payment at the end of the term to finalise your repayments.
Credit card. Buying a car on your credit card might seem simple and convenient, with the added bonus of earning a big stack of reward points. However, high interest rates on credit cards, not to mention surcharges imposed by car dealers, mean this option is typically not recommended.
Redrawing on your home loan. The final option is to use your home loan’s redraw facility to access the equity you have built up there. If your home loan offers this flexibility and you have sufficient funds built up, this can be a convenient option to help you take advantage of lower mortgage interest rates. However, be warned that redraw fees may apply and you’ll need to be sure you can afford your increased mortgage repayments.
Features to consider when comparing your BMW finance options
Consider the following features and inclusions when investigating the finance choices for your new BMW:
Loan term. Check how long you will have to fully repay any money you borrow. Will this be managed with regular repayments of the same amount or will there be a larger balloon payment required at the end of the loan term? Terms typically range from one to five years for fixed-rate loans and can extend up to seven years for variable-rate loans.
Interest rate. The interest rate has a substantial impact on the total cost of your loan. Even a small variation in the rate can make a big difference to the total amount of interest you pay, so compare a range of finance options to find the best rate available.
Fees. Read the fine print closely to familiarise yourself with any fees that apply to your loan. These could be one-off upfront fees or regular ongoing fees, while you may also incur charges in special circumstances, such as if you make an additional repayment ahead of schedule.
Comparison rate. The interest rate isn’t a true reflection of how much a loan will cost; you can get a much clearer idea of the cost of a loan by examining its comparison rate. This figure includes the interest rate and all fees that apply to a loan, and is a very useful tool when comparing multiple loan products.
Loan amount. Are there any minimum or maximum loan limits? If so, are they suitable for your borrowing requirements?
Repayment schedule. Any finance option you choose must have a repayment schedule that suits your income and budget. Make sure you can comfortably afford to make regular payments as well as any balloon payments at the end of the term (if required).
Things to consider before you finance a BMW
Before you decide on a finance option for your BMW, familiarise yourself with the ins and outs of each option and any pros and cons that apply. As an example, while dealer finance can be a convenient and affordable option for some buyers, it’s important to be certain that any dealer finance you are offered represents a good deal. In addition, remember that any balloon payments required once the loan term finishes can be substantial and could cause financial difficulty.
Next, check whether the finance option you are considering allows additional repayments. Making extra repayments whenever you can afford them can help you pay off your loan ahead of schedule, but in some cases you will be charged a fee for each of these repayments. This could have a huge impact on the total cost of your loan, so if you want a finance option with additional repayment flexibility, make sure this option is included.
When comparing finance options, remember that the price advertised for a vehicle usually doesn’t reflect the total cost you end up paying. You’ll need to factor a range of other expenses into your calculations, including:
Stamp duty
Dealer delivery
Optional extras (eg automatic transmission)
Registration
Insurance
Interest on your car finance
Finally, make sure you’ve compared your finance options before you walk into a car dealership ready to buy. This will ensure that you know how much you can afford and allow you to negotiate with confidence.
What you will need to apply for a loan
Before starting an application for any BMW finance option, make sure you satisfy any eligibility criteria that apply. You will usually need to meet the following loan conditions:
You must be at least 18 years of age.
Your credit history has to be good.
You may need to earn a specific minimum income amount each year.
You must be eligible to live and work in Australia for the full loan term.
If you meet the above requirements, and you’re ready to apply for car finance, be aware that you’ll be required to supply specific information and documentation during the application process. This includes:
Proof of ID. An Australian driver’s licence or your passport will be sufficient.
Financial information. The financier will request proof of your ongoing income, for example recent pay slips and bank statements, as well as information about your assets and liabilities. This will help the financier to determine your capacity to repay the money you borrow.
Vehicle information. You’ll also need to supply the make, model and purchase price of the car you want to buy.
If you want to hit the road in a new BMW, there are myriad finance options available to help you buy your next vehicle. Just make sure that you carefully compare the pros and cons of each finance option before deciding on the right one for your financial needs.
Tim Falk is a writer for Finder, writing across a diverse range of topics. Over the course of his 15-year writing career, Tim has reported on everything from travel and personal finance to pets and TV soap operas. When he’s not staring at his computer, you can usually find him exploring the great outdoors.
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