What’s a Balloon Payment?

This can also be referred to as a residual payment. Think of it like a layby for your business vehicle or equipment. Instead of paying the full amount monthly, you defer part of the cost until the end of your loan term.

Simple Example:

• Vehicle Price: $60,000 ute
• Balloon Payment: $18,000 (30%)
• Finance Amount: $42,000 over 5 year

Why use a balloon?

Lower Monthly Payments

“We reduced our monthly payment by $300 and used that for materials and wages”

• More cash for business operations
• Easier to manage seasonal fluctuations
• Keeps working capital in the business

Business Growth

“The extra cash flow let us take on bigger jobs”

• Money available for materials and wages
• Can invest in marketing or additional equipment
• Build up that business emergency fund

Flexible End Options

When your balloon is due, you can:

• Pay it out and own the vehicle outright
• Refinance it over 2-3 more years
• Trade up and roll it into a new loan

Real Tradie Business Example

Pam’s Plumbing Business

• Challenge: Needed new van but monthly payments were too high
• Solution: 30% balloon payment structure
• Result:
  • Monthly payment: $980 → $680
  • Extra $300/month for business operations
  • Van paid off in 5 years as planned

“The balloon payment gave us breathing room when we needed to buy materials and some of our clients were slow to pay.”

Is a balloon right for our business?

Yes if you:

• Need lower monthly payments for cash flow
• Expect business growth over the loan term
• Want flexibility at the end of the loan

Maybe if you:

• Prefer to own everything outright
• Don’t like planning for future payments

“What percentage should we choose?”

Common balloon amounts:

• 20-30% for utes and vans (most popular)
• 25-40% for trucks and heavy equipment
• Higher balloon = Lower monthly payment

Worth noting: You’ll pay slightly more interest over the life of the loan with a balloon payment, keeping in mind that the interest is deductible. However, many businesses find this worthwhile for the immediate cash flow benefits when they need working capital most.
Think of it as: Paying a small premium for financial flexibility.

Top Tips

💡 Plan Ahead

• Budget for the balloon from day one
• Review options 12 months before it’s due

💡 Use Tax Benefits

• Balloon payments don’t affect your tax deductions
• Still claim depreciation on the full vehicle value
• Chat to your accountant for more info & around timing

💡 Don’t Stress the Balloon

• Most clients refinance when it’s due
• Vehicle trade-ins often cover part of it
• Finlease can restructure if business circumstances change

When Balloons Make Sense

For New Businesses

“We were just starting out and needed lower payments to establish cash flow”

📊 For Growing Operations

“Lower payments meant we could invest in more tools and equipment”

📈 For Seasonal Businesses

“Lower payments during quiet months, then we tackle the balloon during busy season”

Ready to Explore Your Options?

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Call 1800 358 658 or visit finlease.com.au

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