Buying a car with a balloon payment – What you need to know

The Darkness

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I'm sure you pay interest on the balloon amount (so no, it's not just a delayed deposit) and thus whatever you invest in, must beat the interest rate of the loan to be viable.
Exactly! They have it all worked out. Balloon payment is a **** idea. Rather people should buy the car they can afford, never new either, pay in mostly cash if you need to finance
 

Neuk_

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Probably looking for how much it cost you with nothing to show for it (but fond memories?).

Like playing golf? Or riding my mountain bike? Or having a catch up and a few beers with some friends?

Just want to know how financially viable it turned out to be, in the end.

I never looked at so I can't answer, I have never looked at any of my cars from a financial viability point of view, although some I have made money on and two I currently own I would make money on if I exclude running costs.
 

Neuk_

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Just want to know how financially viable it turned out to be, in the end.

Sorry, I realised now you want to see if taking a balloon payment worked out cheaper than not, in my scenario? It has been a long day with a teething 7 month old.
 

Magnum

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I'm sure you pay interest on the balloon amount (so no, it's not just a delayed deposit) and thus whatever you invest in, must beat the interest rate of the loan to be viable.
I'm sure you pay interest on the balloon amount (so no, it's not just a delayed deposit) and thus whatever you invest in, must beat the interest rate of the loan to be viable.
No. The Point of the Balloon is no interest.
 

3WA

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WollieVerstege

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Balloon payments, like any financial instrument, when used incorrectly can get your fingers burned.
In my case, bought a car with a balloon. With the difference in the monthly payment, I bought a nice little plot on the West coast. 5 years later I sold that property for almost 6 times what I paid for it.
Without a balloon payment I would simply have been stuck with a depreciating asset and no money in the bank.
 

3WA

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Balloon payments, like any financial instrument, when used incorrectly can get your fingers burned.
In my case, bought a car with a balloon. With the difference in the monthly payment, I bought a nice little plot on the West coast. 5 years later I sold that property for almost 6 times what I paid for it.
Without a balloon payment I would simply have been stuck with a depreciating asset and no money in the bank.

If I could easily identify investments that are going to go 6X without any work, I would just take out personal loans and invest in them.
 

newby_investor

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Aug 8, 2018
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As pointed out previously, you take a "balloon" payment if you don't plan to keep the car for the full term of the loan. It makes the monthly payments lower. It works especially well with brands like BMW that have guaranteed buyback schemes after 3-4 years.

In these cases, paying the absolute minimum is less important than getting the value of always driving a relatively modern vehicle. From this point of view it's one of the most economical ways to do that, compared with long-term rentals or leases.

If you plan to keep the car for the long term, then of course it's stupid because if you couldn't afford the higher payments monthly, how are you going to afford 30% of the car's value all at once.
 
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