If you are considering purchasing a new vehicle for your business via a Hire Purchase agreement, you may of been provided with terms such as Balloons or Residual Values.   Let's break down those terms and discuss the benefits and disadvantages of including a Balloon or Residual Value within your Hire Purchase agreement.

Both Balloons and Residual Values refer to an offet payment due at the end of a Hire Purchase agreement for a vehicle or machine. 

In the context of business finance on hard assets such as Vehicles, a Balloon payment refers to a lump sum payment that is due at the end of the term, in addition to the regular payments.

A Balloon can be used to reduce the amount and size of payments during the term. For example, a business that is financing a vehicle may choose to make lower monthly payments during the term by including a Balloon at the end of the agreement.

What are the benefits of including a Balloon in your Hire Purchase agreement?

Paying a larger Balloon payment at the end of a Hire Purchase agreement can have several benefits for your businesses, including:

• Lower monthly payments: By choosing to make a larger Balloon payment at the end of the term, your business can reduce your monthly payments. This can help to free up cash flow for other areas of your business.
  
  
• Lower overall cost of financing: Paying a larger Balloon payment at the end of the term can help to reduce the overall monthly cost of financing your asset. 
  
  
• Option to purchase: Paying the Balloon at the end of the Hire Purchase agreement will give you full ownership of the vehicle.

What if you don't want to pay the Balloon at the end of the agreement term?

If you do not have the cash reserves to pay the Balloon at the end of your Hire Purchase agreement, or would prefer to invest the cash elsewhere, you have the following options:

Have you found a vehicle for your business?

If you've found a vehicle, we can provide same-day approval and payout to your vehicle supplier.  We would need to know the make, model, and value and how much you would like to Balloon at the end of the Hire Purchase agreement.  We can provide multiple quotes depending on how much or how little (if at all) you would like included in your Balloon payment.