A higher residual value translates to lower monthly instalments for the buyer. It’s a value that a third party (such as the dealer, OEM, or bank) guarantees the car will be worth at the end of its lease and is calculated by determining how much the car will depreciate over the course of the lease. Your options at this point in time will be to settle, trade in your vehicle, or refinance the outstanding amount.A residual applies to car leasing. The downside to balloon payments is that at the end of the contract, an amount of R90 000 will still be owed on the car. Interest will be calculated on the full outstanding amount.
In other words, you will only pay the monthly instalment on the R210 000 (R300 000 minus R90 000), which makes it much more affordable.
Let’s say you buy a car for R300 000 with a balloon of 30% (R90 000), the R90 000 will only be payable at the end of the contract as your last instalment. A balloon payment is where a portion of the total value of the car is only due at the end of the contract.
