Balloon Payment

It is common in personal contract purchase and some loan structures. The balloon is often linked to the car’s expected value at the end of the deal. You can usually pay it, refinance it or hand the car back, depending on the contract. Ask for a written example showing the total amount payable with and without the balloon.

Part of the price is deferred to the end of the term, so the monthly payments cover less of the car’s value.

You pay interest on the deferred amount for the whole term. If the car is worth less than the balloon at the end, you may have to cover the gap.