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Car Finance and Balloon Payments in the UK
| Guest post by: Al Shea |
Article Overview: How does car finance in the UK work when a balloon payment is involved? What is a balloon payment and how can it help me when buying a car for my business on finance?
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Car Finance and Balloon Payments in the UK
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.
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Article Tags: balloon payment, balloon payments, car finance, finance car
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About the Author: Al Shea RSS for Al's articles - Visit Al's website Click here to visit Al's website   Financing a Subway Franchise in the United Kingdom Software Finance for Businesses in the UK Should You Get a Business Loan or a Credit Card The important factors to consider when choosing a commercial finance broker asset finance broker in the UK How an underwriter will look at your business accounts to establish if you are creditworthy for UK asset finance |
Related Forum Posts
Re: Finance is the primary requirement of business
- [quote="rauljoseph":36x8dadn]Finance is very important in a business. It is all about managing the business' money and other assets. Finance includes the study and analysis of processes, financial institutions, markets and instruments that are involved in the transfer of money or anything that has a monetary value among consumers, businesses and government.[/quote:36x8dadn]
Good point.
I'll just add that if I was going into business for myself and could only have one skill it would be Sales & Marketing. You need to be able to create customers first and foremost. Finance is more of a support function for entrepreneurs.
Finance is the primary requirement of business
- Finance is very important in a business. It is all about managing the business' money and other assets. Finance includes the study and analysis of processes, financial institutions, markets and instruments that are involved in the transfer of money or anything that has a monetary value among consumers, businesses and government.
Online Payment Methods
- I'd like to know what Payment method do entrepreneurs use to process credit cards online?
Here at RSC Business Group we have made a decision to go with Paypal in the short term. If we find that we have more than 10 transactions a month then we plan on going with a Bank Processor of Payments.
What do you guys use?
Which kind of industries are you interested in?
- Ecological or E-business or Investment or Finance or Management or Non-Profit or Retailer or others.
Improve your Cash Flow
- As we all know, the primary concern of proprietors and managers are cash flows. I would like to share some tips on how to improve the cash flow of your business.
1. Speeding up Collections - collecting receivables earlier, on or before due dates. Discounts for early payments can be one way to do this.
2. Slowing Down Payments - stretch your payables and pay only when it is due. But be careful not to mess up with your credibility.
3. Invest in Marketable Securities - use the money in Marketable Securities and other short-term investments to earn extra cash.
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