Balloon payment instead of lease - worth it?

Ant · 09-12-2016, 07:57 AM

I recently graduated college so I'm trying to keep my monthly payments as low as possible without having to spend too much out of pocket. I've been dying for a Camaro in a medium blue ever since I had to get rid of my 2010 Aqua Blue (2LT/RS), because I was going to school and couldn't afford it. :(

When I saw the new Hyper Blue come out, I knew I had to get one again. Originally, I planned on saving up some money and leasing one next year (probably a 1LT). However, I came across one on the lot at my local dealer that is exactly what I wanted and more.

It's a left over 2016 model. Hyper blue 2LT/Rs with black interior. Black chevy emblems, moonroof, technology package with 8-inch touch screen and Bose audio. Performance exhaust.

The sticker price on the car was about $41k. I came to an agreement with my dealer for $33,535. I was approved for a balloon loan for $35k at 2.5% for 60 months which would be $383 a month (for 5 years) with a balloon at the end of $15,600.

Is this a smart investment? Do you think the car will be worth at least $15k if I put about 15,000 miles on it a year for 5 years? Or should I save up some more money and wait it out?

I had my mind set on getting out of my current lease, driving a used car with no payment and saving some money to buy a Camaro next year. But then I saw this on the lot and happened to get what I feel like is a great offer on it. I feel like it was meant to be lol.

jasonsk287 · 09-12-2016, 08:26 AM

That's a great deal on that car.

It's tough to tell about the value after 5 years. My 1LT (non-RS) is a 2012, five years old with 70,000 miles (I do about 14k a year). They say mine is worth about $15k if I sell it privately, and $12k-13k if I trade it in. I don't think a balloon loan would be for me, but it does get those payments down for the loan's duration, so that's pretty cool. If the deal works for you, go for it! Unfortunately I don't have first hand experience with balloon loans to help you in that respect.

clrkmr · 09-12-2016, 09:00 AM

Balloon loans have plus and minuses. Consider this though. Over 5 years will you be making more money at the end of 5 years than now? Don't now what job you have or what you do, but if you are in a career where you will get regular raises, then you could over pay on your monthly payment say starting in year 3 or 4 and pay it down more so your balloon payment isn't as much. But make sure their is no prepayment penalty or you can't do this. A lot of balloon payment loans have prepayment penalties.

Waiting46 · 09-12-2016, 10:23 AM

Cars are NEVER a good investment. Sometimes they work out, but I wouldnt rely on it. But, if you know what you want and can afford it there are some things you should consider about your own financial status:

Do you have a full-time job, or one lined up that is in a career field that is stable or expanding?
After purchasing the car will you have at least 3 months of expenses (including car payments) saved in case of emergency?
Are you willing to give up hobbies/luxuries (eating out, new clothes, impulse buys, etc)?
Can you also afford the insurance hike that will come with a new car?

BigGuy81 · 09-12-2016, 08:41 PM

No.

For one, you're in the ballpark of some of the SS's being listed right now. Next, you're talking about this as an investment. Cars are not an investment, especially not a V6 Camaro. That thing is not going to be worth anything in 5 years.

Save up for another year or two and buy a nice CPO 2SS for $30k.

JaxChris · 09-12-2016, 10:24 PM

Balloon payment loans ensure you'll never have equity until the last year of the term. You are paying 0.75% higher interest rate than you should be and you're also shaving your max loan length by 1 year. The interest in your payment is based on the full amount, but they are only charging/crediting half of the principle amount compared to a traditional auto loan.

Sounds like they are putting you through Pen-Fed. They are a good bank. If I planned to keep a car for exactly 5 years, nothing less, then I would consider using their "Payment Saver" loan just to keep my payment down. I'm hoping this 2016 can have the bugs worked out and I keep it much longer, but there is a good chance I'll be looking for a 2019 in 3 years -- so right now the balloon loan is not a choice I would make.

buck50 · 09-13-2016, 08:04 AM

Quote:

Originally Posted by Ant

I had my mind set on getting out of my current lease, driving a used car with no payment and saving some money to buy a Camaro next year.

Would suggest you stick with your original plan. There will be a great deal out there a year from now.

Ant · 09-13-2016, 09:25 AM

Quote:

Originally Posted by JaxChris

Balloon payment loans ensure you'll never have equity until the last year of the term. You are paying 0.75% higher interest rate than you should be and you're also shaving your max loan length by 1 year. The interest in your payment is based on the full amount, but they are only charging/crediting half of the principle amount compared to a traditional auto loan.

Sounds like they are putting you through Pen-Fed. They are a good bank. If I planned to keep a car for exactly 5 years, nothing less, then I would consider using their "Payment Saver" loan just to keep my payment down. I'm hoping this 2016 can have the bugs worked out and I keep it much longer, but there is a good chance I'll be looking for a 2019 in 3 years -- so right now the balloon loan is not a choice I would make.

Yes, it is the PenFed Payment Saver Loan lol. I applied for the loan myself and didn't go through my dealership.

Ant · 09-13-2016, 09:32 AM

Quote:

Originally Posted by BigGuy81

No.

For one, you're in the ballpark of some of the SS's being listed right now. Next, you're talking about this as an investment. Cars are not an investment, especially not a V6 Camaro. That thing is not going to be worth anything in 5 years.

Save up for another year or two and buy a nice CPO 2SS for $30k.

The car is going to be my daily driver, so that's why I'm going for the V6. Also, even if I put down $5k in 2 years on a $30k car, my payments will still be over $500 probably for 4 years. Not sure if that's a good idea.

Waiting46 · 09-13-2016, 10:03 AM

Quote:

Originally Posted by Ant

The car is going to be my daily driver, so that's why I'm going for the V6. Also, even if I put down $5k in 2 years on a $30k car, my payments will still be over $500 probably for 4 years. Not sure if that's a good idea.

If $500 is too much, dont do it. That doesnt include tires, fluids, etc.

Ant · 09-13-2016, 11:00 AM

Quote:

Originally Posted by BigGuy81

No.

For one, you're in the ballpark of some of the SS's being listed right now. Next, you're talking about this as an investment. Cars are not an investment, especially not a V6 Camaro. That thing is not going to be worth anything in 5 years.

Save up for another year or two and buy a nice CPO 2SS for $30k.

What if I sold the car in 2-3 years from now? Do you think I'd be able to sell it without getting screwed?

raptor5244 · 09-13-2016, 11:03 PM

Quote:

Originally Posted by Ant

What if I sold the car in 2-3 years from now? Do you think I'd be able to sell it without getting screwed?

The problem is buying a new car when you really shouldn't. The wise thing to do is to buy a 3 year old car with low miles and not have to incur all the depreciation that comes with a new car. Save some money and when the time is right put a heathy down payment and use traditional financing rather than worrying about ballon payments, etc.

JaxChris · 09-14-2016, 12:39 AM

If you did the balloon loan, you would be upside down for almost the entire 5 year term. And to answer your other thread about residual value down the road a 2LT/RS V6 is probably only be worth about half of the sale price (if you buy a 35k car for 30k, it'll be worth 15k) after 42-48 months of age and normal mileage/condition.

The 1LT's will be worth 1000-1500 less due to lack of leather and premium sound system. As many have mentioned, buying brand new vehicles is always a losing proposition.

Don't do the balloon loan unless you plan to keep the vehicle for at least the full term. If you think you will want to trade-in within a few years, then you need to pony up a decent down payment and take a standard loan to drop your negative equity in about 2 years.

Ant · 10-09-2016, 02:20 PM

Quote:

Originally Posted by JaxChris

If you did the balloon loan, you would be upside down for almost the entire 5 year term. And to answer your other thread about residual value down the road a 2LT/RS V6 is probably only be worth about half of the sale price (if you buy a 35k car for 30k, it'll be worth 15k) after 42-48 months of age and normal mileage/condition.

The 1LT's will be worth 1000-1500 less due to lack of leather and premium sound system. As many have mentioned, buying brand new vehicles is always a losing proposition.

Don't do the balloon loan unless you plan to keep the vehicle for at least the full term. If you think you will want to trade-in within a few years, then you need to pony up a decent down payment and take a standard loan to drop your negative equity in about 2 years.

With this dealer's October 20% price tag, I can now probably get the car for around $30,500-$31,000. If I do a 48 month payment saver loan through PenFed (2.24% interest), my payments would be $325 per month (which is doable for me) and my balloon at the end would be $17,851.

I definitely plan on keeping the car for at least the 4 years. I'm starting to think this might be the way to go for me.

09-12-2016, 07:57 AM	#1
Ant Drives: 2017 Camaro 1LT/RS (V6) Join Date: Dec 2008 Location: Long Island, NY Posts: 911	Balloon payment instead of lease - worth it? I recently graduated college so I'm trying to keep my monthly payments as low as possible without having to spend too much out of pocket. I've been dying for a Camaro in a medium blue ever since I had to get rid of my 2010 Aqua Blue (2LT/RS), because I was going to school and couldn't afford it. :( When I saw the new Hyper Blue come out, I knew I had to get one again. Originally, I planned on saving up some money and leasing one next year (probably a 1LT). However, I came across one on the lot at my local dealer that is exactly what I wanted and more. It's a left over 2016 model. Hyper blue 2LT/Rs with black interior. Black chevy emblems, moonroof, technology package with 8-inch touch screen and Bose audio. Performance exhaust. The sticker price on the car was about $41k. I came to an agreement with my dealer for $33,535. I was approved for a balloon loan for $35k at 2.5% for 60 months which would be $383 a month (for 5 years) with a balloon at the end of $15,600. Is this a smart investment? Do you think the car will be worth at least $15k if I put about 15,000 miles on it a year for 5 years? Or should I save up some more money and wait it out? I had my mind set on getting out of my current lease, driving a used car with no payment and saving some money to buy a Camaro next year. But then I saw this on the lot and happened to get what I feel like is a great offer on it. I feel like it was meant to be lol.

09-12-2016, 08:26 AM	#2
jasonsk287 Drives: 2012 Camaro 1LT Join Date: Dec 2010 Location: Long Island, NY Posts: 404	That's a great deal on that car. It's tough to tell about the value after 5 years. My 1LT (non-RS) is a 2012, five years old with 70,000 miles (I do about 14k a year). They say mine is worth about $15k if I sell it privately, and $12k-13k if I trade it in. I don't think a balloon loan would be for me, but it does get those payments down for the loan's duration, so that's pretty cool. If the deal works for you, go for it! Unfortunately I don't have first hand experience with balloon loans to help you in that respect. __________________ 2012 Camaro 1LT Summit White/Black Rally Stripes Ordered 8/21/11, built 9/22/11, delivered 10/7/11

09-12-2016, 09:00 AM	#3
clrkmr Drives: 2017 50th Anniversary Join Date: Aug 2016 Location: California Posts: 99	Balloon loans have plus and minuses. Consider this though. Over 5 years will you be making more money at the end of 5 years than now? Don't now what job you have or what you do, but if you are in a career where you will get regular raises, then you could over pay on your monthly payment say starting in year 3 or 4 and pay it down more so your balloon payment isn't as much. But make sure their is no prepayment penalty or you can't do this. A lot of balloon payment loans have prepayment penalties.

09-12-2016, 10:23 AM	#4
Waiting46 Drives: 1981 silver corvette,Hyper Blue 2SS Join Date: May 2015 Location: Ohio Posts: 625	Cars are NEVER a good investment. Sometimes they work out, but I wouldnt rely on it. But, if you know what you want and can afford it there are some things you should consider about your own financial status: Do you have a full-time job, or one lined up that is in a career field that is stable or expanding? After purchasing the car will you have at least 3 months of expenses (including car payments) saved in case of emergency? Are you willing to give up hobbies/luxuries (eating out, new clothes, impulse buys, etc)? Can you also afford the insurance hike that will come with a new car?

09-12-2016, 08:41 PM	#5
BigGuy81 Account Suspended Drives: Man Join Date: May 2016 Location: https://t.me/pump_upp Posts: 143	No. For one, you're in the ballpark of some of the SS's being listed right now. Next, you're talking about this as an investment. Cars are not an investment, especially not a V6 Camaro. That thing is not going to be worth anything in 5 years. Save up for another year or two and buy a nice CPO 2SS for $30k.

09-12-2016, 10:24 PM	#6
JaxChris Drives: '16 2SS GD1 MX0 NPP F55 IO6 Join Date: Jun 2013 Location: Florida Posts: 1,298	Balloon payment loans ensure you'll never have equity until the last year of the term. You are paying 0.75% higher interest rate than you should be and you're also shaving your max loan length by 1 year. The interest in your payment is based on the full amount, but they are only charging/crediting half of the principle amount compared to a traditional auto loan. Sounds like they are putting you through Pen-Fed. They are a good bank. If I planned to keep a car for exactly 5 years, nothing less, then I would consider using their "Payment Saver" loan just to keep my payment down. I'm hoping this 2016 can have the bugs worked out and I keep it much longer, but there is a good chance I'll be looking for a 2019 in 3 years -- so right now the balloon loan is not a choice I would make.

09-14-2016, 12:39 AM	#13
JaxChris Drives: '16 2SS GD1 MX0 NPP F55 IO6 Join Date: Jun 2013 Location: Florida Posts: 1,298	If you did the balloon loan, you would be upside down for almost the entire 5 year term. And to answer your other thread about residual value down the road a 2LT/RS V6 is probably only be worth about half of the sale price (if you buy a 35k car for 30k, it'll be worth 15k) after 42-48 months of age and normal mileage/condition. The 1LT's will be worth 1000-1500 less due to lack of leather and premium sound system. As many have mentioned, buying brand new vehicles is always a losing proposition. Don't do the balloon loan unless you plan to keep the vehicle for at least the full term. If you think you will want to trade-in within a few years, then you need to pony up a decent down payment and take a standard loan to drop your negative equity in about 2 years.

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