The Balloon Payment

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What is the balloon payment?

If you purchase your vehicle under a lease, a balloon payment may be payable at the end of the term. The balloon payment is a lump-sum payment made close to the final repayment under your loan for your vehicle in order to payout the vehicle. This is popular in 2 instances; 1) you are wanting to sell the vehicle prior to the loan being paid off and need to own it outright to sell it or; 2) to stop paying interest on the vehicle when you have the money to pay it off. For example, you have paid $30,000 plus interest off a $40,000 loan and you have $10,000 left to pay. To save having to pay interest on the last $10,000 you could pay this as a lump-sum.

For more information see our Car Buying Guide

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