Estimates only. Excludes lender fees & charges. Not financial or credit advice.
Model exactly how a balloon (residual) payment changes your repayments, use the calculator above with the balloon field, pre-set here to a typical 30% structure.
A balloon payment carves a lump sum out of your loan and parks it at the end of the term. Because your regular repayments only need to amortise the remaining balance, they drop noticeably, which is why balloons are popular in dealer finance and novated-style structures. The trade-off is mathematical, not a trick: interest accrues on the full outstanding balance for the whole term, so the total interest you pay is always higher than the same loan without a balloon.
As a worked example: $35,000 over 5 years at 9% p.a. costs about $727 a month with no balloon. Add a $10,500 (30%) balloon and the repayment falls to roughly $587, but you'll owe the $10,500 at the end and pay around $1,900 more in total interest along the way.
Every balloon needs an exit plan: pay it out (you own the car), refinance it (a new, smaller loan, at whatever rates are then), or sell and settle (the car's value covers the balloon, hopefully). The risk to manage is owing more than the car is worth at the end, which is why lenders cap balloon percentages by term and why conservative balloons beat aggressive ones.
How does a balloon change my repayments? It lowers them, because repayments only amortise the non-balloon portion, while total interest rises since the full balance accrues interest throughout.
What percentage is typical? 20-40% of purchase price; 30% is a common dealer default.
What happens at the end? Pay it out, refinance it, or sell the car to cover it, decide which before signing.
Is it a good idea? Good for cash flow and regular upgraders; more expensive overall if you keep the car. For the deeper version, read Balloon Payments Explained.