Here is an example of a finance agreement which is structured to include a balloon payment.
Under a Personal Contract Purchase (PCP) agreement an optional balloon payment is referred to as the vehicles Guaranteed Minimum Future Value (GMFV).
| VEHICLE COST: | £12,500 | |
|---|---|---|
Less: | Deposit: | £2500 |
| = | Balance: | £10,000 |
| Less: | Balloon or GMFV: | £4,000 |
| = | £6,000 | |
| + | (Interest on £10,000) | £1,884 |
| = | Balance for monthly payments | £7,884 |
| Divided by Term (36 Months/3 Years) | Monthly payments | £219 |
| Administration Fee | £100 included with 1st payment | |
| Option to Purchase Fee | £100 included with balloon/GMFV |
Payment Schedule
Here is the payment schedule for the PCP with a balloon payment (known as the GMFV).
| 1 | Deposit | £2,500 |
| 2 | 1st payment (£219 + £100) | £319 |
| 3 | 35 payments | £219 |
| 4 | Balloon/GMFV + £100 | £4,100 |
| 5 | Total amount to be paid including interest | £14,584 |