Balloon payments can sure pop car buyers' bubble

11 June 2018 - 07:17
Buying with 'a balloon' is the only option for increasing numbers of South African motorists. File photo
Buying with 'a balloon' is the only option for increasing numbers of South African motorists. File photo
Image: Alexsey Kurguzov /www.123rf.com

If the only way to get your car instalment down to a number you can afford every month is to carve out about a third of the total amount owing on the financed deal as a “balloon payment”‚ you really can’t afford those wheels and should opt for something cheaper.

That’s good advice‚ but given that car prices have increased between 30% and 40% in the past two to three years‚ along with the price of petrol and insurance‚ buying with “a balloon” is the only option for increasing numbers of South African motorists.

First-time car buyer Dudu Koloi bought a new Kia Rio from a Kia dealership in Gauteng in May 2016 but only recently discovered that after she’s paid her R4‚700 a month for another four years – six years in total – she will still owe R70‚500 on the car.

She was horrified‚ and adamant that no one at the dealership had said a word about a balloon payment. “They just talked about the contract being for 72 months.”

X