A `balloon payment` is a large payment that is normally made at the end of a finance agreement.
It is also referred to as a lump sum and is a portion of the capital cost/value of the vehicle that the customer is not paying for within the regular payments that they make to the finance company.
The benefit of a balloon payment is that, because a lump sum is deferred to the end of the agreement, the customer enjoys lower monthly payments or a shorter term.
Finance repayment cycle:
- Regular Payments
- Balloon Payment