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What is a ballon payment on a leased car, please explain it to me?

shonnie - 2006-01-17 06:51:00 - Buying Selling

I got my car thinking that i was in a lease agreement. Now i'm getting letters stating that i have a ballon payment, what is that, and i had no clue that i got this contract.

Best Answer:

OK, so it's probably not a lease, but rather a balloon loan. A balloon loan is a lot like a lease in that you're only paying for depreciation for the first 3 years or so. So for a 40K car you might only be paying 15K for the first three years. THe remainder is the balloon, in this case $25K. Usually with a balloon loan there is an agreement where you can hand the car back to the dealership at the time the balloon is due and if you stay below your mileage limits and the car is still in good shape, they will take the car and pay off the balloon.

Answers:

Ballon payment is a kind of paying option used in consumer credits and leasing. You pay the wholly or partly principal of the credits, frequently at the maturity date as a whole.

OK, so it's probably not a lease, but rather a balloon loan. A balloon loan is a lot like a lease in that you're only paying for depreciation for the first 3 years or so. So for a 40K car you might only be paying 15K for the first three years. THe remainder is the balloon, in this case $25K. Usually with a balloon loan there is an agreement where you can hand the car back to the dealership at the time the balloon is due and if you stay below your mileage limits and the car is still in good shape, they will take the car and pay off the balloon.