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Discussion Starter #1
i was looking around on the mazdausa site and found out about the retail balloon payment plan thingy. i was just wondering what everybodys opinion on this? im looking into this as a good way to reduce my payment and still retain ownership.
 

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You will owe more in interest if you use a "balloon payment" option. Your payments will be lower, but that whopper of a final payment will make Mazda happy they tricked another person into this type of deal.
 

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stay away from this , dude. if you want lower pmts. consider leasing. better for you in the long run fo the following reasons:

1) no tax on car. when you lease you only pay tax on pmt amount. if you do balloon pmt. deal you will not only pay tax on full purchase price, you will finance it, therefore pay interest on the tax as well.

2) because you are only paying the depreciation down to the residual value on the lease, you can either put more car on the road for each dollar of pmt you can afford, or if you look at it from another angle, the car you want will always cost you less per month.

3) if you do either get a lemon, or if you just plain get tired of the car, you can simply turn it back in at the end of the lease. I could go on and on, but i think you get my drift
 

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Opposite consideration,

I actually went with the retail 60/84 ballon payment plan.

Reasons to consider:

1) Lower monthly payments - equal to or sometimes lower than a lease. (Always set your payment term to bi-weekly, this decrease the amount of interest you have to pay. My payments dropped $30 per month by going bi-weekly $30 x 60 month = $1800 instant savings)
2) Better Rates - 2.9% for 60/84 vs.48 month lease at 4.9% (This is in Canada)
3) You can get out at anytime in a Financing situation. (In a lease you are stuck until lease end. Your car or financial situation might change and you might need to get our of your lease)
4) Mileage - Personally, I drive over 30k per year. To lease are car would not be practical and cost too much.
5) Low ballon payments at the end. Usually around $7-8K. Affordable if you choose to keep the car. (A lot less than lease residual)
6) No expensive minor cosmetic repairs when you return the car at lease end.
7) Lower insurance when you are not leasing
8) Take the monthly amount you save and use it on other things in life or invest it. You get at better return than the 2.9% anyways.

For me this is the most practical solution given I cannot lease due to mileage. I need the financial flexibility. Paying $500 + a month is out of the question (I am paying under $300) and I want to have full ownership flexibility.

Sure there are some negative as mentioned by others. However, it all depends on your situation. and what makes more sense.
 

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I'm a finance guy, so I wanted to throw my 2 cents in.

The idea of this balloon plan is to simulate the payments you would have if you had a trade-in or down payment when you bought the car. Basically, Mazda loans you a down payment, and after 60 months you pay it back in one lump sum. You are counting on the fact that the car is worth enough 5 years from now to pay off the balloon. The plus side is that your payments are lower, the minus side is that when you go to buy your next car, you also won't have a down payment/trade-in to lower the payments on your next loan.

I haven't seen the numbers, but I'd guess this is a good deal (compared to a lease) if you take care of your car and don't put too many miles on it. In that case, the trade-in value of the car will be worth more than the balloon payment, so you will have some money left over. If you put a lot of miles on your car, your car will be worth less, and you may have to put some money into the balloon payment.

Some things to consider: If you decide to keep your car after 60 months, all you have to do is find a bank that will refinance the balloon payment. Then you can keep making payments until the car is totally paid off. Here's another thing - Don't wait until the last minute (5 years from now) to trade the car in and pay off the balloon The salesman at the dealership will probably give you a very lowball offer for your car because he knows you need to sell in a hurry.
 

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Discussion Starter #6
so for a guy that is trying to move out but still have a nice car this might be a good idea? i drive maybe 10k a year and thats if i have classes every single day of the week(not likely). i plan on refinancing the remaining payment at the end of the term. im just trying to get the most bang for my buck on a limited budget
 
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