Vehicle Leasing Options - what are balloon payments?

Leasing options, balloon payments.

We have many different and varied options when wanting to get ourselves a new car. We can save and buy a new or used vehicle or we can borrow finance to purchase a new car. One of the borrowing options available to us through a finance broker is to lease a vehicle.

Leasing a vehicle is available to both personal users and business organizations. A personal lease involves you renting the car for an agreed period of time between one and five years. You make monthly rental payments on your vehicle until the term of your contract is up. On completion of the lease you can then make an offer for the vehicle to the finance company.

A company leasing arrangement works in the same way with the company making lease rental payments for the term of the contract that usually runs for between one and five years. Lease payments for company vehicles are fully tax deductible unless they are luxury vehicles in which case there is no advantage to lease the vehicle for business purposes.

Finance for a car lease can be arranged through a finance broker who has access to a list of lenders that they are accredited with. These banks and other financial institutions pay the finance broker for the business which they get for them so there is no need for you to pay them again when the lenders are already paying them a commission.

When leasing a vehicle there is a balloon payment at the end of the term of the lease. The amount of the balloon payment reflects the value of the vehicle at the end of the contractual term. These balloon payments can be anywhere between 25-45% of the vehicle value. So if you haven’t planned for them they can make a significant dent in your savings or business cashflow.

If you think that you need finance to make your balloon payment on your lease then a finance broker can help you with one of the many different lending packages that they have available for their clients. A finance broker can quickly advise you of which lending products offer the cheapest interest rate, saving you time and money.

To find your nearest finance broker you can visit the online web directory that has a full listing of Australian finance brokers. Free financial advice is a good starting point even if you already have a good idea about leasing and finance matters.