When financing a vehicle or piece of equipment, most people focus on two numbers: how much they’re borrowing and what the monthly repayments will be. But there’s another factor that can make a big difference - the balloon payment.
Let’s break it down.
A balloon payment is a lump sum that’s deferred to the end of your loan term. Rather than paying off the entire amount in equal installments, you pay smaller repayments throughout the loan, then cover the remaining balance (the balloon) in one go at the end.
It’s commonly used in car and equipment finance as a way to reduce monthly commitments, especially when you're managing other business or personal expenses.
Let’s say you finance a $40,000 vehicle over 5 years with a $10,000 balloon.
You’ll make regular repayments on the $30,000, then pay the remaining $10,000 at the end of the term.
A balloon structure can be useful if you:
It’s especially popular with self-employed clients and small business owners who want more breathing room early on.
Balloon payments aren’t the right fit for everyone. You might want to avoid one if:
It’s important to consider what your financial position will be both now and in 3–5 years.
Balloon payments are a great tool when used strategically, but like all finance options, they need to suit your goals and timeline.
If you’re considering a balloon option on your next vehicle or equipment purchase, we can help you run the numbers and decide what works best.
Want to know if a balloon payment is right for you?
Book in to speak to one of our brokers here.
