What is a balloon payment?

What is a balloon payment?

A balloon payment is specific to certain contracts such as PCP. This is the payment that is made at the end of the finance or lease agreement. It is sometimes optional (as is the case with PCP when a person wants to take ownership of the car) or sometimes it is compulsory as is the case with some finance leases.  With PCP the balloon payment is the agreed value of the car at the end of the agreement and is sometimes called the guaranteed future value.

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