what is auto balloon financing?

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  • Anonymous
    1 decade ago
    Favorite Answer

    A balloon financing plan has two stages. The first stage is where you agree to pay a payment over time (usually very low payments and on a short term). The second stage is after you completed your monthly payments you have one last payment, the remaining balance of the car, and you still owe that payment. You can refiance it if you don't have the cash.

    ex- if the car your buying is $20,000 and your montly payments are $250 for the first three years, your final payment or balloon payment will be around $13,000. Of course all these numbers are estimates and the reason the balloon payment is higher is because you have to account for interest. In a balloon program, you owe that money.

    Leases work the same except after your monthly payments, you have the option to buy the car, if you don't want it anymore, just turn it in.

    I would recommend leasing over balloons, there work very similar, but at the end of the low monthly installments, you have more options on a lease.

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  • Anonymous
    1 decade ago

    It's called a balloon loan, and is similar to a lease. You make relatively low monthly payments, but then a huge final payment, which means you have to finance a new loan to keep the car, for another few years. You end up paying for many years and your total finance charges are large.

    Some lenders treat this kind of loan like a lease, in the sense that they allow you to return the car if you don't want to refinance the balloon payment. However, you have to pay for any excessive mileage and extra wear and tear, like a lease.

    Most people who are talked into a balloon loan by a dealer don't know how it works, like the low payments but are horrified by the surprise final payment.

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  • jay
    Lv 7
    1 decade ago

    Balloon financing works just like a lease, they can be open or closed ends. Balloon financing came out to combat the vicarious liability law from the old days making the car owner liable for accidents, in a lease, that is the lease holder, so banks were being sued for accidents. A balloon put the title in the buyers hand and laid all the responsibility on them.

    There is no reason to balloon anymore, unless it's a used car and leasing isn't available.

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  • Anonymous
    5 years ago

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    RE:

    what is auto balloon financing?

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  • 3 years ago

    What Is A Balloon Payment

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  • Anonymous
    1 decade ago

    like any balloon financing, initial payments are low but you're hit with a large payment after a few years which usually requires that you refinance since most people don't have a clue about saving $

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  • 4 years ago

    For the best answers, search on this site https://shorturl.im/axWem

    That does not exist with traditional lenders.....that's why you can't find it.

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  • Anonymous
    1 decade ago

    probably like a home balloon mortgage

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  • 1 decade ago

    sounds like you pay so much per month for X years, then a lump sum at the end.

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