Three way financing / balloon financing

Three-way financing and balloon financing are similar to each other. However, the process differs slightly, so you should carefully consider which of the two models is advantageous for you. If you meet the requirements and you can exclude disadvantages, then you will get your car cheaply and safely via the two models.

Prerequisites and procedure for three-way and balloon financing

Prerequisites for three-way financing are a down payment in the contractually agreed amount and your personal requirements, as you can read in detail on the home page of the specialist portal on car financing. The process is similar to leasing. In addition to a down payment, you finance a fixed portion of the purchase price each month. A final installment is due upon return of the car. Alternatively, you can continue to finance the car with a follow-up loan or purchase it at a residual purchase price.

Balloon financing is contractually agreed at a fixed interest rate. The prerequisite for this is your down payment and the payment of a high residual purchase value at the end of the term. As this is a common form of car financing, it is worth looking for specialized offers. Then the down payment amounts are often pleasantly low. For a short term you pay monthly installments. At the end, the final installment due transfers the car finally into your ownership. A follow-up loan is also possible with this type of financing, but is not frequently used. Because the conditions for this are usually too expensive compared to the residual value of the car.

Advantages and disadvantages of both financing models

With the three-way loan for car financing, you only have to finance part of the car's value via installments. The initial and final installments reduce the total price of the financing model. They also have several options here, and when they choose to continue financing, they usually have favorable follow-on interest rates. Likewise, the down payment amount is often pleasingly low. However, not all vehicle financiers offer this financing model. Manufacturers mainly run such programs in order to better sell new or poorly performing model lines, for example. That limits your options when it comes to choosing a vehicle type. Also, complaining about defects in the car can make the final installment significantly more expensive. You need to pay close attention to the terms and conditions that apply to this as soon as you sign the contract. Retail customers are best suited for auto financing through three-way loans.

If you want to keep the car after the financing expires, the balloon loan is advantageous. The search for a financier is simple. Because very many banks work with this financing model. Balloon financing rates are almost always low, and the down payment is also affordable. The disadvantage here, as in the case of car financing through mobility packages, is the short contract terms. Another disadvantage is the always high final installment. It is equal to the residual value of the car financing and is due in a lump sum immediately at the end of the contract term. Balloon financing is also aimed mainly at private customers. Compared to three-way funding, it nonetheless significantly limits closing options.

  • With further financing usually favorable follow-up interest rates
  • Z.T. Low deposit amount
  • Z.T. High final installment

Conclusion on three-way and balloon financing

Three-way financing allows for a variety of options with favorable down payment, installment and residual payment terms. However, defects in the vehicle can significantly increase the final installment. The options for balloon financing are even more limited. However, it can be obtained from a great many financial lenders at favorable rates. Both models of car financing are suitable mainly for private customers.

Three-way / balloon financing calculator

With the 3-way / balloon financing calculator you can calculate the cost of financing. Enter the price of the vehicle first. If you make a down payment on the financing and pay a final installment, you can also enter this into the financing calculator. If this is not the case for your financing model, please enter a 0. Together with the term in months and the effective interest rate, the calculator calculates the loan amount, the total cost, the monthly installment and the interest cost and the cost share of the amortization loan.

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