Balloon loan?

[Ngkgb]

Anticipating my delivery I’ve begun to look into financing options. I was wondering if anyone here has financed their vehicle using a balloon loan and if so through which lender? I know a lot of credit unions do this.

Thanks

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[CommodoreAmiga]

but why?

 

[Ngkgb]

but why?

Why not? Depending on certain factors they can be great. The Ford Options Program for the Mach E is a balloon loan and gives a lot of flexibility.

 

[ironpig]

Hell no. I would never take a balloon loan on any car but especially an EV.

 

[Dark-Fx]

Could be a good option if inflation keeps going the way it is

 

[CommodoreAmiga]

Why not? Depending on certain factors they can be great. The Ford Options Program for the Mach E is a balloon loan and gives a lot of flexibility.

Sounds like all the downsides of conventional financing and leasing all rolled up into one predatory package!

I assume you're interested in some adjustable rate mortgages, as well?

 

[COdogman]

Unless you are 100% sure you would have that much $ sitting around come balloon time, it seems risky. Unless you plan to refinance before then, which would probably result in you paying more than necessary had you just done a traditional loan.

 

[ironpig]

Even if a "credit union" is offering this, stay away. It's a terrible idea.

 

[mkg3]

The value is you only make interest payments until the balloon is due in however long the term is, right?

So if you believe the interest rate will drop within the timeframe leading up to the balloon, then you can refinance at the lower rate.

The best solution, I believe for any gen 1 EV is a closed end lease. The technology on EV is changing very fast, and probably want to get rid the vehicle before the motor/battery warrantee is up.

3 year lease on Rivian maybe the best to bridge you to the gen 2 (with dual motor) R1 platform or to R2 platform. Or to a completely different EV. The way EVs are holding value (current situation is an anomaly though), total outlay for 3 year use is quite reasonable.

 

[Count Orlok]

what a terrible idea especially with only single digit inflation, rising rates, and that you will be upside down for years and need to refi or have cash at the end of the term. If you can't afford the vehicle, find something else.

 

[Oldsmobile_Mike]

No. Absolutely not. But it's your money. ?

 

[Count Orlok]

Why not? Depending on certain factors they can be great. The Ford Options Program for the Mach E is a balloon loan and gives a lot of flexibility.

what "certain factors?" I can't think of a single advantage other than it can allow one to assume a larger liability than one can afford.

 

[SANZC02]

A balloon for a car is essentially a lease where you pay the interest and a portion of the principle based on a projected value of the vehicle at the end of the term.

The problem is there is not enough market data to say what that value really could be at the end of the 3 or 4 year term.

It is a big risk as in a normal lease the lender takes on the risk of what the value will be at the end of the term, with a balloon loan you take on the risk.

If you have, or anticipate having the money available at the end of the term you could be lowering your monthly cash flow, that could be an advantage based on the repressed market and give some investments time to recover. Keep in mind interest rates are usually higher for this type of loan so in the long run you would most likely be spending more in the long run.

In my opinion, there are more negatives than positives to this type of loan and would not go in that direction.

 

[ironpig]

The value is you only make interest payments until the balloon is due in however long the term is, right?

So if you believe the interest rate will drop within the timeframe leading up to the balloon, then you can refinance at the lower rate.

The best solution, I believe for any gen 1 EV is a closed end lease. The technology on EV is changing very fast, and probably want to get rid the vehicle before the motor/battery warrantee is up.

3 year lease on Rivian maybe the best to bridge you to the gen 2 (with dual motor) R1 platform or to R2 platform. Or to a completely different EV. The way EVs are holding value (current situation is an anomaly though), total outlay for 3 year use is quite reasonable.

This is 100% correct. For almost all EVs, a lease is the best way to go if you want better range, tech etc in 3 years.

Rivians are holding value better than most cars but it's just because of scarcity. Long term a gen 1 Rivian is not going to hold value better than any other EV.

 

[Ngkgb]

what "certain factors?" I can't think of a single advantage other than it can allow one to assume a larger liability than one can afford.

1. Not planning to necessarily hold the car more than 3 years
2. The instant equity of Premarch orders along with likely high MMR/RV would make for rioe conditions for a balloon loan.

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