By Lewis Buckley, Business Development Manager.
The most common car finance product is a PCP. Compatible with both new & used cars, it is a great way to keep your monthly outgoings affordable. The product is made up of monthly repayments typically over a 3- or 4-year term, with a sum left at the end, known as the balloon value or balloon payment. At the end of the term the car is then sold, or part exchanged against a new vehicle to clear the remaining sum outstanding.
With the current car market climate though, we’re speaking to an increasing number of people who have balloon payments due but want to keep their current car. This might be due to a slow release and supply of new cars from manufacturers – with order lead times now pushing delivery into the middle of 2022. The appeal of a newer used car is also less attractive, as with less new cars available, prices on used cars are spiking.
So, if you have a balloon payment due, and want to keep your current car what are your options?
Credo Finance and the broker partners that we work with have products available to refinance the balloon payment on (or just before) it falls due. The new lender pays off the current finance company & the value of the balloon is refinanced over a further 2-, 3- or 4-year term.
This means you keep your outgoings manageable, but still offers flexibility to be settled early if you then find a suitable car. You’re not tied in for the full term, keeping a car that’s ever getting older and further from what you really want to be driving in.
Most people don’t know this is an option. At Credo we’ll contact our customers around 3 months before their balloon payment is due, to start the discussion around the options. Of course, paying the balloon through your own cash reserves is still an option, but we understand that many people would prefer to preserve their cash rather than put this into a car.
If you’ve got a balloon deal with Credo, expect a call but feel free to get in touch early to confirm your options. We’re also able to step in and help with refinancing balloon payments owed to other lenders, ideal for if you’ve taken manufacturer finance options when buying a new car.
To talk to Lewis contact him on 07841 486893 or firstname.lastname@example.org