Here is an example of a finance agreement which is structured to include a balloon payment.
Under a Personal Contract Purchase (PCP) agreement an optional balloon payment is referred to as the vehicles Guaranteed Minimum Future Value (GMFV).
|Less:||Balloon or GMFV:|
|+||(Interest on £10,000)||£1,884|
|=||Balance for monthly payments||£7,884|
|Divided by Term (36 Months/3 Years)||Monthly payments||£219|
|Administration Fee||£100 included with 1st payment|
|Option to Purchase Fee||£100 included with balloon/GMFV|
Here is the payment schedule for the PCP with a balloon payment (known as the GMFV).
|2||1st payment (£219 + £100)||£319|
|4||Balloon/GMFV + £100||£4,100|
|5||Total amount to be paid including interest||£14,584|