Balloon loan?

[TAZ]

There's many variables to take into consideration before saying hell no, its a bad idea. How you get compensated such as commissioned vs straight salaried is one of those variables. I did a balloon through PenFed a few years back and it worked out well for my needs. The key advantage is a low monthly payment when needed but the ability to still pay the vehicle off in advance. Remember a monthly payment whether it be a car loan or a mortgage is a minimum and not a maximum. Paying through the life of the balloon loan and then still needing to pay the remaining half of the vehicle is where the risk comes in. Pay now or pay later, regardless you need to pay!

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[Ostrichsak]

Wait... this is a real thing?! I seriously thought it was a joke. Like clickbait headline to get eyes on.

Balloon payment loans are awful products for the consumer even on appreciating assets like real estate. But to do this on a depreciating asset like a vehicle... run.. don't walk from this and whomever is suggesting it to you. Get new counsel on that topic.

As someone who is staunchly against financing ANY depreciating asset, this has got to be the worst way of going about it. Leases would be a close second and the best possible way is the shortest term with the most money down you can afford.

I semi-regularly get asked how I've got to my place in life and I will offer you the same basic advice I give anyone: Don't even finance anything that goes down in value. (This applies to "outliers" and rare unpredictable times like this year because exceptions should not be planned on because they're too unpredictable and risky.) and don't buy things you can afford (aka finance/loans) and you'll go far in this life with finances.

If you have to finance something like a car, you can't afford it. Buy something you can afford with cash and save up until you're able to pay cash for whatever you want. You'll be surprised how quickly you arrive at that last phase if you stop buying things you can't afford.

I realize that last statement goes counter to what most "financial experts" on this and other forums will say but that's also why so many people are broke. Stop listening to people who tell you that giving any lending institution your hard-earned money in the way of interest is somehow a benefit to you. It isn't.

Do what you will with the rest of that info but if you (or anyone still reading this post) takes only one thing away from this: Do NOT do a balloon loan on a vehicle.

 

[Tahoe Man]

Don't do a lease. Nothing is going to really change in three years to justify the cost of a lease....20 or 30 more miles of range? whoopee....If possible pay in cash. If cash isn't available save up until it is.

 

[Mathme]

balloon payment loan on a depreciating asset is crazy. yes, you'll have minimum payments and have more cash flow. the problem is when you get ready to sell it -- before the balloon date -- you'll be so upside down in equity, that you'll have to pay someone to take it off your hands.

You're better off going for a standard loan and paying it down. You can always refinance if/when loan rates drop in the next few years.

I'm also of the camp that I pay cash for my cars. However, my most recent one I financed as it was a .49% interest rate. Did I have the money to pay for the car outright, yes. However, I chose a loan on this because I was able to make money elsewhere on my money.

 

[Ngkgb]

People need to do a bit more research before saying never lease. Leasing has many many advantages.

Whi do you guys assume ill
Be so upside down after three years? There’s already 20k automatic equity when I take possession of it and EVs have held their value pretty good. My 2019 Etron has been an amazing lease and I have about 8-10 equity I’ll put towards the Rivian.

The balloon loan through ford has a final payment of about 21k. I’m Loretta certain the car will be worth more than that at that time and if not I can return it.

 

[ironpig]

1. Not planning to necessarily hold the car more than 3 years
2. The instant equity of Premarch orders along with likely high MMR/RV would make for rioe conditions for a balloon loan.

It doesn't matter if you got a discounted (pre march) price, it's not a smart to bet the 3 year depreciation curve on a brand new vehicle that hasn't been in customer hands for even a year.

The only reason to even think about a balloon loan is if you absolutely can't live without the car (IE can't work without transportation or need a work truck for new business, etc).

 

[ironpig]

Don't do a lease. Nothing is going to really change in three years to justify the cost of a lease....20 or 30 more miles of range? whoopee....If possible pay in cash. If cash isn't available save up until it is.

I have never leased a vehicle for all the obvious reasons and for clarity, I paid cash for my Rivian. But I actually think this is a good time to lease an EV.

If I was looking at a commuter EV car I might consider doing a 2-3 year lease and then see what new models hit in 2025. There aren't many other EVs that are exciting enough right now to think "I'm going to own this for 10 years". Rivian being the obvious exception.

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