Residual Purchase Agreement

This is a loan agreement with a lender or bank whereby a portion of the loan is paid over a set period by monthly instalments, and then with a final (larger) one-off payment at the end of the term. This final payment is also known as a 'balloon' payment. This 'balloon' payment may be either be paid at which time you will then own the vehicle, or this final 'balloon' balance may be refinanced again to extend the payment term. With this type of agreement, should you not want to pay this final 'balloon' payment, you have the option to either simply give the car back to the bank or lender (after you have made all the monthly instalments) and you will not be liable for any further payments, or you may replace your existing vehicle for a brand new one.

• Monthly instalments are usually lower on this type of finance agreement as the largest payment is not due until the end of the agreement
• You have the choice to keep the vehicle at the end of agreement period, or to just simply give it back to the bank or lender and end all payments (subject to mileage conditions)
• Option to return your vehicle before the 'balloon' payment is due, and get a new model vehicle (subject to your personal circumstances)

• If you decide to keep the vehicle and pay off the full outstanding balance (including the final 'balloon' payment), you would need to raise the funds to make this final larger 'balloon' payment
• If the vehicle is returned at the end of the agreement period, you may be liable for charges due to excessive mileage or damage to the vehicle
• Monthly instalments will accrue interest on the full amount of the loan including the final 'balloon' amount (excluding the initial deposit amount)