The dealership says the move is necessary because BMW is entering a new segment -- the entry-level premium -- and needs to win customers from rivals such as Mercedes-Benz and Audi.
The offer comes from the Kaltenbach-Gruppe in the Rhineland region of Germany. The dealership offers buyers a 2,000-euro reduction for a new 1 series model when they trade in their old car.
Kaltenbach managing director Norbert Amelung said they have had a lot of interest from potential customers.
But BMW bosses in Munich are annoyed at the dealers' go-it-alone offer. "We're not happy," said a BMW manager.
And BMW's dealer association spokesman Peter Enders condemned the offer.
"It's totally unnecessary because there is a great demand for the 1 series."
BMW says it will sell the 1 series in the US, but won't say when. The car will compete against the Audi A3 and Mercedes-Benz A Class.