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HIRE PURCHASE WITH A BALLOON
Hire purchase with a balloon offers greater flexibility than normal hire purchase. You pay lower monthly fixed payments and at the end of the agreement, you can make a final lump sum payment (or 'balloon') to own your car. This payment is calculated on the estimated future resale value of the car.
You gain the benefits of fixed rate finance, but with the added advantage of a lower fixed monthly outlay because you defer repayment of some of the borrowing. At the end of the agreement your options include car purchase, refinance, part exchange or resale.
In a typical agreement, you choose the amount of deposit to pay, usually 10-50% of the car's cost. The difference between this and the agreed balloon, plus the fixed interest, is repaid over a fixed term (12-60 months). At the end of the term you can make the final balloon payment, and own the car.
The benefits of Hire Purchase with a Balloon:
- Low deposit - keeps valuable personal or business cash available
- Lower fixed monthly payments - perfect for budgeting
- A better car - lower payments can help you choose a higher specification car
- Flexibility - doesn't compromise your other lines of credit
- Assets - you gain ownership of the car
- Tax benefits - Tax allowances for business users
- VAT free - no VAT on payments
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