Using a balloon payment option can be a great option when you’re purchasing your next vehicle, but there are some important considerations you have to think about first. We’ve taken the time to list four questions you need to ask before signing up for balloon payments.
Will you be able to get the car you need and stay within budget?
It is important to remember that the vehicle you buy should fit your needs.While a more expensive car might be affordable in the short-term, if it’s not the right fit for you or your business in the long run, you might be able to fulfil the large repayment amount at the end of the loan’s lifetime.
Can you upgrade the loan?
Before you take on a balloon payment option, take some time to make sure that you can upgrade the payment options for when you want to trade the car in for a new one. Ideally, you should be able to trade your car when the balloon payment is made, and then borrow 100% of the car with the option to use a balloon payment again. In short, you would have had to use your car for the full term of its loan at reduced payments, and upgraded the vehicle when the balloon payment was due.
Do you know what your options are for selling?
When taking on a balloon payment option, you should be able to sell the car in future, with the option to add the sales proceeds to the balloon, in effect reducing its amount.
Can you structure your repayments to have a large interest proportion?
Not many business owners know that when taking out a car loan for their business, only the interest component of the repayments can be deducted from tax. This is because you can claim back against the depreciation of the car, which means your principle payment does not qualify for tax claims.
That means that when you take on a balloon payment option, you should ensure that you can increase the amount of interest payable over the term of the loan, which will mean you can deduct a larger amount against your tax.
As you can see, there is much to consider when determining if a balloon payment is the best option for your vehicle finance. If you need more information, contact one of the friendly consultants at Simply Finance today.
Related Tag: Car Finance with Balloon