What a balloon payment will really cost you

2012-02-11 10:47

“I have been quoted R220 000 for a new Mini with a balloon repayment of about 40% and I can afford it. My dad is discouraging me saying the balloon repayment can be problematic in the future.

“How bad can a balloon repayment option be?” asks Ntswaki.

Using Absa’s online calculator it is clear what the impact of a balloon or residual payment would be.

I assumed the dealer has also maximised the payment period to 72 months to make it appear more affordable.
Finance over 72 months with an interest rate of 10% and a 40% residual:

» Monthly repayment:
R3 179

» Residual amount payable:
R88 000

» Total cost:
R316 888

Finance over 72 months with an interest rate of 10% and no residual:

» Monthly repayment:

» Residual amount payable:

» Total cost:
R293 400

The residual has cost you an additional R23 488 in interest. You also need to have R88 000 cash available in order to settle the residual payment.

If, like most people, you re-financed the R88 000 over a further three years, the total cost would be R419 092.
You would have paid nearly R200 000 in interest – almost the price you paid for the car.

As a matter of interest, based on the depreciation rate of the Mini, after six years the car would be worth R100 000.

Now this is not a good investment.

Join the conversation!

24.com encourages commentary submitted via MyNews24. Contributions of 200 words or more will be considered for publication.

We reserve editorial discretion to decide what will be published.
Read our comments policy for guidelines on contributions.

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
Comments have been closed for this article.

Inside News24

Traffic Alerts
There are new stories on the homepage. Click here to see them.


Create Profile

Creating your profile will enable you to submit photos and stories to get published on News24.

Please provide a username for your profile page:

This username must be unique, cannot be edited and will be used in the URL to your profile page across the entire 24.com network.


Location Settings

News24 allows you to edit the display of certain components based on a location. If you wish to personalise the page based on your preferences, please select a location for each component and click "Submit" in order for the changes to take affect.

Facebook Sign-In

Hi News addict,

Join the News24 Community to be involved in breaking the news.

Log in with Facebook to comment and personalise news, weather and listings.