What is a balloon (residual) payment on a car lease?

Take the example car from our guide to how car leasing works: RM 100,000, with RM 10,000 down over 60 months at a flat 3.5% a year.

With no balloon, the monthly payment would be RM 1,762.50. With a balloon of RM 30,000 (30% of the price), it is RM 1,262.50. The difference is the balloon itself: RM 30,000 spread over 60 months is RM 500 a month.

• Pay the balloon from your own money.
• Refinance it, if you are approved. Approval is not guaranteed.
• Return the vehicle.

Your agreement explains what each choice means, including the condition the car must be in. Read it before you sign.

• The balloon is real money. A lower monthly payment moves part of the cost to the end of the term.
• If you keep the car, your overall cost is the total paid during the term plus the balloon.
• Interest is charged on the whole amount financed, balloon included, for the whole term.
• Decide how you will meet the balloon, for example by saving a little each month, before you choose a lease.

Every car page shows the balloon on its own line next to the monthly payment, and every monthly figure on the site says that it excludes the balloon. Use the lease calculator to see how the balloon changes with the price, or read how a lease compares with hire purchase.