Balloon Auto Financing Smart Alternative To Leasing

Balloon Auto Financing Basics

Beef up your balloon auto financing knowledge with our helpful guide. Everything you need to know about balloon auto financing is right here.

Balloon Auto Financing Explained

Balloon auto financing is really a hybrid loan-it combines the best features of leases and conventional auto loans. Similar to a lease, balloon auto financing offers monthly payments that are significantly lower than those of traditional loans. In contrast to a lease, however, you actually own the vehicle with balloon auto financing and are conferred all the benefits of ownership. Here is how it works: you make low monthly payments for a specified term (usually 2-5 years). After this term, you have several options. You can keep the car and refinance the outstanding balance, keep the car and pay off the outstanding balance in full, or sell or trade in the car in lieu of the remaining balance.

Benefits of Balloon Auto Financing

Balloon auto financing comes with some valuable benefits, including the following:

  • No down payment or security deposit required
  • 30% lower payments than a traditional car loan, on average
  • Generous or no mileage restrictions, depending on the dealer and the lender
  • Flexible terms
  • 100% financing
  • Choose to trade, sell, return, or refinance the car at the end of the term
  • Sell, buy, or trade vehicle at any time without any penalties
  • You own the vehicle and enjoy all the benefits of ownership

What Happens at the End of the Term

Once your low monthly payment term has expired, balloon auto financing gives you the flexibility of several options. You can:

  1. Return the vehicle. You return the vehicle in lieu of paying the remaining balance.
  2. Sell the vehicle. At any point during your balloon auto financing loan, you have the option to sell the vehicle. Once your term expires, you can still exercise this option and pay off the remaining balance on the loan.
  3. Trade the vehicle in. You can trade the vehicle in and use the equity you've built in it to get a new vehicle and help pay off the outstanding balance on your balloon auto financing loan.
  4. Keep the car and refinance the remaining balance. You can always choose to keep the car and refinance the remaining balance so you continue to have low monthly payments.
  5. Keep the car and pay the balance in full. If you want to keep the car, you can also make a lump-sum payment on the balance.

Please check out our leasing page to compare leasing and balloon auto financing.


You can apply for several free quotes on balloon auto financing by filling out our short application.

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