BMW Finance Offers 2015: Understanding Balloon Financing

When it comes to buying a new car, one of the most important factors to consider is financing options. In recent years, balloon financing has become increasingly popular, especially in Australia. But what exactly is balloon financing, and how does it work?

To understand balloon financing, let's first look at why people opt for this type of financing. During the 2015 economic downturn, many homeowners were stuck with huge balloon payments on their mortgages due to under water houses. In an effort to lower monthly payments, some opted for balloon financing, intending to refinance in a few years when the value of their house increased. However, if you're doing it solely to reduce your monthly payments and cannot afford the original loan, you may be putting yourself in financial trouble.

In the context of car financing, balloon financing is more common than you might think. It involves taking out a 5-year loan with a lower monthly payment, but at the cost of a higher balloon payment at the end of the term. For instance, if you're paying an extra $2,000 to opt for a 5-year loan, it may not be the best financial decision.

One advantage of balloon financing is that you can keep your money invested and only pay the balloon amount at the end of the term. However, this approach often backfires when the car's value depreciates faster than expected, leaving you with negative equity. In some cases, finance companies offer a fixed interest rate, meaning you're still liable to pay the full 5-year contract even if you sell the car before the term ends.

On the other hand, choosing a lower balloon percentage, such as 20%, can be a more financially savvy option. This way, you'll have a better chance of selling your car and paying off the remaining amount without being stuck with negative equity. Unfortunately, many people opt for a higher balloon percentage to get into a more expensive car with lower monthly payments, often ending up in financial trouble.

In conclusion, while balloon financing may seem appealing at first glance, it's essential to carefully consider the terms and conditions before making a decision. It's crucial to weigh the pros and cons and calculate the total cost of ownership to ensure you're making the best financial choice for your situation.

Bmw finance offers 2015