What is it?
Conditional Sale with a balloon is similar to our standard Conditional Sale product but with lower monthly repayments since a significant repayment of the amount of credit is deferred to the final payment. This final amount is known as a balloon payment and is calculated by forecasting the value of the car at the end of your agreement. The main difference between Conditional Sale with a balloon and Personal Contract Purchase is that the balloon payment must be paid by you in full.
How does it work?
- Your dealer will structure the agreement to meet your requirements based on the car, the agreement duration, the available deposit, and your monthly budget
- Your finance quotation will include the balloon payment
- After paying the initial deposit you make regular monthly payments and the balloon payment to cover the amount borrowed plus any interest and fees
- The interest rate is fixed so you’ll know exactly how much you will repay throughout the term of the agreement
At the end of the monthly payment period you have two options:
Features and Benefits
- Offers you a lower fixed monthly payment, compared to our standard Conditional Sale product
- Could allow you to finance your car over a shorter term
- May be better if you don’t want to be bound by mileage conditions
This type of agreement is covered by the Consumer Credit Act 1974, which means
- You can pay off lump sum amounts during the agreement
- You can settle the agreement early by repaying the required amount
Other things you should know
- The agreement is secured against the car. If you do not keep up your repayments, we may take steps to recover the money owed, which may include repossession of the car
- Only when all payments under the agreement have been made, including the balloon payment, do you become the owner of the vehicle
- If you put down a lower deposit it could mean a higher risk of negative equity if you settle early or want to change the car before the end of your finance agreement
- It is your responsibility to repay the balloon payment which means you take responsibility for any difference between the balloon payment and the value of the car
- The balloon payment is not optional and also attracts interest throughout the agreement
- This type of finance agreement is not available to corporate entities, e.g. limited companies, PLCs or limited partnerships