---

Guest post by: Al Shea Become an Author

Tweet

---

---

Not many business people buy their cars outright, most people lease them from various funders or vehicle providers such as the main dealerships. You generally buy your car on finance over a 2 or 3 year term and pay for it monthly. At the end of the lease you normally either give the car back to the funder or you can make a final payment and own the car, this is called a balloon payment.

The purpose of the balloon payment is to help reduce the monthly payments you need to make during the agreement. Bascially, if you buy a new car for £40,000 and put it over a 3 year finance deal, you really don't want to pay off the full £40,000 in just 3 years because the chances are you'll sell it on at the second hand market value, say £20,000. The balloon payment is the residual value that the funder puts on the vehicle based on how many miles you think you'll drive over that period - the second hand value ie £20,000. By putting this balloon payment at the end you can either sell it (to cover the final payment) or make that final payment from your own funds. The benefit of doing this is that the monthly payments are only based on the car value minus the balloon payment, rather than the full amount, therefore reducing your monthly payments quite dramatically and opening up a wider range of vehicles to you.

The other option is contract hire, which doesn't involve any balloon payments because you are hiring the vehicle for a contracted period of time, you simply return it at the end. The monthly payments are based on how many miles you do per year and what the funder feels the car will be worth at the end of the lease term.

Related Articles

  Calculator for New Car Loans
  Sourcing the Finest Car Finance Australia Has Available
  Costs Involved For New Car Finance
  Business Finance For Poor Credit UK Companies
  Responsibilities Of A Equipment Loan
  Cost Of New Boat Loans
  Sometimes the most common Promotional Products can be the most effective
  New Car Loans Interest Rates In Australia
  The Costs Of Car Loans
  Many Evangelical Church Leaders are now having to "Walk by Faith"
  Car Finance Calculator Fields To Related Figures
  Supporting In Getting And Recognising The Cost Regarding New Car Finance Australia
  Online Car Finance Brokers Can Certainly Help
  An inclusive Answer from a Boat Finance Calculator
  The difference between fixed term and minimum term business finance agreements
  Is Secured Car Finance Cheaper
  Boat Loans Online For Australia
  Commercial Equipment Finance
  New boat Loans Compared Online With Ezi Finance
  Equipment Finance

Related Forum Posts

Re: Finance is the primary requirement of business
Finance is the primary requirement of business
Online Payment Methods
Which kind of industries are you interested in?
Re: Hello, Everyone!

Share this article. Fund someone's dream.

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

Employee follow-up coaching session

Doing Customer Service Right!

How to Improve Your Time Management

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.