Despite all the ballooning payment issues caused by the housing crash of 2008, used correctly, these loan terms can be a viable option for lowering monthly payments, especially on expensive cars.
An example of the resurgence of lump sum payments in the automotive sector comes from Toyota Financial Services Philippines (TFSPH), which is now promoting its Balloon Payment Plus financing option as an alternative to typically more expensive car rentals.
As The Philippine Daily Inquirer reports, “Balloon Payment Plus, a unique leasing product from Toyota Financial Services Philippines (TFSPH), offers customers low monthly payments compared to regular financing; Periodic maintenance service throughout the loan term for worry-free upkeep,” and an option to upgrade at the end of the loan term.
To take advantage of the program, consumers first select a down payment equal to 20%, 25% or 30% of the suggested retail price (SRP) of a vehicle, then decide on the term of the loan, which can range from 24 months to 60 months.
At the end of the financing period, consumers can pay off a lump sum of up to 45% of the value of the car and own it — it’s the “balloon” — or make a trade-in.
Toyota’s main website has basic information about the Balloon Payment Plus program, which is available in markets outside of Asia, although no details are provided.
Melbourne, Australia-based finance broker National Loans is also promoting balloon loans for automobiles, noting in a statement: “Balloon payment auto loans are well suited for those who like to upgrade their vehicle often. If the buyer prefers to trade in the vehicle at the end of the loan term, National Loans recommends choosing a balloon loan of a size similar to the cost of the vehicle’s current value and trading in the vehicle when it reaches the threshold. profitability. This is when the commercial value of the car matches the amount of the settlement due.
At a time when used cars are rare and expensive, and new car prices are also ahead of recent years, balloon financing that offers very low monthly payments is attractive to some drivers.
In October, the Wall Street Journal (WSJ) reported that “U.S. consumers paid an average of $42,368 for new vehicles in September, up 17% from the same month last year, according to a preliminary estimate. from the data provider JD Power”.
See also: Automotive apps add vehicle financing to acquire and retain customers