So when you trade in a car, the dealership you are trading in your car at needs to get something called a settlement amount(you can also get this yourself from the website of the bank that financed your car). That settlement amount shows exactly how much you owe, that amount is inclusive of the balloon you took. In a case where the offered price for your car that you are trading in is greater or equal to the settlement amount then nothing is loaded to the new car. But if its less then the difference between the settlement amount and the amount the dealership is buying your car for is loaded on to your new car. For eg if you bought a car for 240K with a balloon of 70K, and say you paid for it for a year and then you want to trade it in at vw for a new car that costs 100K. The bank will give you a settlement amount of say 200K and VW says okay we’ll take your car for 180K so the 20K difference will be loaded onto the new car. So the new amount of that car when financing will be 120K. Few things to note. - it’s important to know what value your car is currently. So that when you trade it in they dont give you a lower figure than what your car actually is worth. - a balloon payment is money set aside, and incurs interest. Every single payment you make per month does not affect the balloon in anyway. That is why most people with balloon payments have settlements amounts that are higher than normal. Which results in having a shortfall when trading in your car. I hope this answers your question
When you trade in your car that has a balloon payment will the balloon payment roll over to the next car you are buying or it just disappears?
So when you trade in a car, the dealership you are trading in your car at needs to get something called a settlement amount(you can also get this yourself from the website of the bank that financed your car).
That settlement amount shows exactly how much you owe, that amount is inclusive of the balloon you took.
In a case where the offered price for your car that you are trading in is greater or equal to the settlement amount then nothing is loaded to the new car.
But if its less then the difference between the settlement amount and the amount the dealership is buying your car for is loaded on to your new car.
For eg if you bought a car for 240K with a balloon of 70K, and say you paid for it for a year and then you want to trade it in at vw for a new car that costs 100K.
The bank will give you a settlement amount of say 200K and VW says okay we’ll take your car for 180K so the 20K difference will be loaded onto the new car. So the new amount of that car when financing will be 120K.
Few things to note.
- it’s important to know what value your car is currently. So that when you trade it in they dont give you a lower figure than what your car actually is worth.
- a balloon payment is money set aside, and incurs interest. Every single payment you make per month does not affect the balloon in anyway. That is why most people with balloon payments have settlements amounts that are higher than normal. Which results in having a shortfall when trading in your car.
I hope this answers your question