Hire Purchase with a Balloon
Hire Purchase with a Balloon offers you greater flexibility compared to Hire Purchase. At the end of the agreement you have the option of making a final lump sum payment ('balloon') to own your car. It is fixed rate finance with lower monthly payments because you defer repayment of some of the borrowing. The deposit you pay is flexible, typically between 10% and 40% of the vehicle cost and the deferred balloon payment is calculated on the estimated future resale value of the car. Payments are usually spread over 12 to 60 months. At the end of the agreement your options include car purchase, refinance, part exchange or resale.
What to do first?
Determine your annual mileage. The estimated future value and final guaranteed 'balloon' payment is then calculated. You agree a deposit, your term and monthly payments.
What are the benefits?
- Lower deposit keeps your valuable personal or business cash available
- Lower fixed monthly payment makes budgeting simple
- Fixed interest protects you from rises in interest rates
- A better car with lower payments than standard Hire Purchase, allowing you to choose a higher specification car
- Asset – you gain vehicle ownership
- Flexible and doesn’t compromise your other lines of credit
- Tax allowances for business users
- No VAT to pay
What about excess mileage?
There is no tie to a mileage contract.
What about 'wear and tear'?
At the end of the agreement the vehicle may be worth more than the agreed residual value if it is well maintained, so it is in your own interest to minimise the vehicle's 'wear and tear' to help its resale value.
Finance packages are subject to status and finance company acceptance. UK residents only.