The balance you postpone
A balloon is a portion of financed principal that remains due at the end of the agreement. Because you repay less principal during the term, regular instalments are lower. The remaining balance still attracts interest under the model.
Compare two scenarios with the same price, deposit, interest rate and term: one with a balloon and one without. Compare total interest and the final payment as well as the monthly amount.
Build an end-of-term plan now
You might plan to pay cash, sell the vehicle or apply for new finance. Selling can leave a shortfall if the proceeds do not cover settlement. Refinancing depends on a new lender assessment and adds costs and time.
A R60 000 balloon in five years is a real obligation. Saving R1 000 a month for 60 months at zero return would build that amount, before fees. Consider this saving alongside the instalment when deciding affordability.
Read the quotation carefully
Check whether the residual percentage applies to the vehicle price or another contractual amount. Confirm the initiation fee, service fee, insurance requirements and early settlement terms with the lender.
The RandMath model treats extra repayments as reducing the outstanding balance. Your lender may allocate overpayments differently, so request a revised schedule before relying on an early settlement plan.
Educational information, not personalised financial advice. This guide was prepared for this release. Read our editorial and corrections policy.