Hire Purchase with Balloon

Hire Purchase with Balloon: A Flexible Way to Own Your Car

Hire Purchase with Balloon works similarly to traditional Hire Purchase but includes a 'balloon' payment at the end. This option gives you lower monthly payments than standard Hire Purchase. At the end of the agreement, you can choose to make a final lump sum payment (the 'balloon') to own the car. By deferring part of the borrowing to the end, you lower your monthly payments.

You decide on the deposit, which is typically between 10% and 50% of the vehicle’s cost. The balloon payment depends on the estimated future resale value of the car. You usually spread payments over 12 to 60 months.

This option is similar to Personal Contract Purchase, but there are no guaranteed minimum future value or mileage restrictions at the end of the agreement. When the agreement ends, you can choose one of the following options:

• Purchase the car by paying the balloon payment.

• Refinance the balloon payment.

• Part-exchange the car and use any equity as a deposit.

• Sell the vehicle privately and keep any equity once you’ve paid the balloon.

What to Do First?

First, determine your annual mileage. The finance company will calculate the estimated future value (balloon payment) based on your mileage. Then, agree on the deposit and term, and the monthly payments will be calculated accordingly.

What About Excess Mileage?

There are no mileage restrictions with Hire Purchase with Balloon.

What About 'Wear and Tear'?

If you maintain the vehicle well, it may be worth more than the agreed residual value at the end of the agreement. Therefore, minimising wear and tear is in your best interest to help increase the car’s resale value.

Finance packages depend on status and require approval from the finance company. Available to UK residents only.