Finance Lease is a leasing agreement where you may share the potential risks or rewards of the future resale value.
Balloon v Full Pay Out
There are two types of Finance Lease - Balloon and Full Pay Out - find out the difference, and which one suits your needs more, below.
HOW DOES IT WORK?
Finance Lease - Full Pay Out
'Finance Lease - Full Payout' enables you to lease a vehicle for a set period of time, before selling it to benefit from a percentage of the proceeds.
You first decide your initial rental, how long you want to lease the vehicle and your annual mileage. These figures are then used to calculate the total cost which is then split evenly over the term of your agreement.
It is 'Full Pay Out' as there is no final balloon payment, the cost of leasing is evenly split across the term.
At the end of your agreement you have two options:-
Enter into a secondary rental period, paying an annual rental and retain the use of your vehicle;
You can sell the vehicle on behalf of Volkswagen Financial Services to a selected third party and receive a percentage of the sales proceeds.
'Finance Lease - Balloon' lowers the monthly payment by defering a chunk of the repayment to the end of the agreement. This has to be paid, irrespective if the proceeds of the vehicle sale covers it.
As with 'Full Pay Out' you decide your your initial rental, how long you want to lease the vehicle and your annual mileage. The total cost of leasing your vehicle is then split into a set amount of equal monthly payments across the term, and a final balloon payment.
It is a 'Balloon' agreement, as part of your finance is deferred into a larger balloon payment at the end of the agreement.
At the end of your agreement you have two options:
Sell the vehicle on behalf of Volkswagen Financial Services to a selected third party and use the funds to settle the final ‘balloon’ repayment. If the proceeds from the sale do not cover the balloon payment you need to make up the difference, however if the proceeds exceeded the balloon payment you get to share of the reward;
Settle the ‘balloon’ repayment without selling the vehicle and enter into a secondary rental period, paying an annual rental and retain the use of your vehicle.