Vehicle Consulting - Balance Payments explained...
To continue our series of articles detailing the finance options available when purchasing a vehicle ,Iain Paston from Vehicle Consulting explains how Balance Payment works...

The mysteries of vehicle finance, continued...

Balanced payment is a finance option resembling Hire Purchase (HP) for contracts over £25K. Unlike HP, where interest is fixed, balanced payment tracks changes in the finance house base rate. As rates fall or rise, so does the interest charge you pay over the period of the contract, although the amount you pay each month is usually fixed (hence balanced payments). The customer is able to make lump sum payments and benefits from lower interest charges .

At the end of the agreement any interest variation is reconciled and settled as final credit or a charge. Options include a deferred 'balloon' final payment or lump sum payment to settle the agreement early.

In a way Balanced Payments is similar to a capital repayment mortgage, and is perfect for those who do not not intend to keep the vehicle for a fixed period as you are not tied in and you only pay interest for the period you actually own the car (most other finance deals 'front load' the interest, i.e. the interest for the whole term is calculated and added onto the total amount to re-pay) this way you start repaying the capital much quicker. If you want to settle the lease early, then typically only one months interest would be charged together with the outstanding capital balance.

Benefits of Balanced Payments include:

Low deposit - keeps valuable personal or business cash available
Flexibility - ability to make lump sum payments
Competitive - low cost options for early termination
Fixed monthly payment - perfect for budgeting
Tax benefits - Tax allowances for business users
Potential savings - save if interest rates fall
VAT free - no VAT on payments

For more information visit www.vehicleconsulting.com or contact Iain directly on 01905 826282 or email iain.paston@vehicleconsulting.com.

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