Hello Mabs
I have been shopping around for a used car because my budget is tight. I recently found the car of my dreams, brand new for R3 999 a month, no deposit and a 40% balloon payment. My friends are warning me to be careful. What am I missing?
Mabs answers:
Well done for asking before signing. Those monthly instalment adverts can feel exciting, especially when they suddenly make a dream car seem possible. But this is exactly where you need to slow down and read beyond the headline number.
A balloon payment lowers your monthly instalment because a large portion of the vehicle value gets pushed to the end of the finance agreement. In your example, 40%means you may still owe a significant amount years later.
Ask yourself: what happens when the agreement ends? Can you settle it, refinance it, trade it in or walk away?
Also, compare the total amount repayable, not just the instalment. Sometimes, a slightly older vehicle with manageable repayments creates far more financial freedom than chasing a monthly payment that looks affordable on paper. Dream cars are wonderful, but financial peace is even better.
