Any one bought with Porsche Finance with Balloon payment ??

[Sunnysidebb]

Hi all,
My finance is up in May and I will have to pay the balloon off.
Just got a quote as to what the Balloon will be and its still the same as 4 years ago.
When I took out the loan the monthly payment was £800 and fixed. Any interest rate rises or reductions would be absorbed my the Balloon which would inflate or deflate.
Well 4 years ago interest rates were high, but now for the last 2 to2 1/2 years they have been low and the balloon should have reduced to reflect the less interets the loan was incurring.
Has anyone had a similar experience. I am really angry about this and would consider putting the car into storage and not paying the final payment and wait for them to take me to court as I feel I have been misled with the loan.
Any thoughts or advice would be very very welcome.

Thanks
Frank

Edited by Sunnysidebb on Tuesday 18th January 17:52

[Deanos CaymanS]

Taken from the current "lease purchase" finance option...

"The interest rate is fixed at the start of the agreement and does not vary, irrespective of how interest rates may change over the period."

To be honest I've only ever seen a baloon agreement with a fixed interest rate agreed at inception.
If you believe you have been misled I would check your finance agreement and if necessary raise this with the finance provider.

[nsm3]

That is how I understood it and how my agreement was set up - the monthly payments and the balloon payment are all fixed at time of inception, regardless of the movement in the market place?

You need to read your agreement carefully - not worth getting a CCJ by hiding the car etc, if you have misunderstood the agreement, but if you have and they have ripped you off, bring on the Legal Eagles?

[M3RMS]

Mine is also fixed interest - and actually I wasn't aware they did a variable option, although perhaps that's driven by the amount you borrow.

The agreements also were very clear on what the final payments will be and also gave some examples of the values should I choose to settle early.

Would be good to get some of the text from your agreement up if poss?

[Sunnysidebb]

Thanks all of you so far.

The problem is as I understood the term Balloon, is that as in a real rubber balloon it can inflate and deflate. Thats why it was called a Balloon. Porsche dont do Balloons now its a fixed sum at the end of the loan. I was told the best way to keep my monthly payments the same was to take the balloon option which would allow any interest rate changed (for the good or the bad) to be absorbed by the Balloon by making the Balloon bigger if the interest rate increased but smaller if the rate decreased. This would guarantee a fixed monthly loan repayment.
Has anyone else been told the same. Please note Porsche new finance does not have the balloon any more just the fixed sum amount at the end of the term and a fixed interest rate.
Thank Frank

[nsm3]

What I said before, but to pad it out - I had a "balloon" payment on my M3 back in 2003, on my C2S (with Porsche Finance) in 2005 on and Audi in 2005 also.

They were all FIXED sums of money, to be paid at the end of the contract. You really need to check your documents, because if someone told you different and you can prove it, there may be a mis-selling" claim there?

[renmure]

Similar to other replies, I understood the Balloon type finance as setting out exactly the amount of monthy payment and exactly the amount outstanding at the end of the finance period.

[anonymous-user]

I have heard of such schemes - sometimes called a balanced payments plan

but I have never looked closely

[JM1962]

I understood the balloon payment was based on the future guaranteed value of the car, if the balloon is more than the car is worth you can hand back the car as full payment. If the car is worth more, you keep the car and pay in cash.

[Sunnysidebb]

Im looking into it at the moment.
Another question: do I have to Pay the Balloon , if I feel it is too high will they just take the car off me. It says in the contract that the car has been hired my me and is the property of Porsche Finance and unless I have not contravened any t&C's then when the final instalment has been paid I have the option to purchase the goods for the option fee specified in the schedule. So does that mean I dont have to pay the Balloon if I give them the car back??
I had a statement in Feb 2010 saying the Balloon was £24,000, today its £26,040 ???
So I feel I am being taken for a ride.
Frank

Edited by Sunnysidebb on Tuesday 18th January 19:19

[barchetta_boy]

I think the moral has to be read the documents very carefully before you sign them. Particularly if you are borrowing tens of thousands of pounds to finance a fast depreciating illiquid asset like a newish Porsche.

Its why I wait. And then pay cash.

Joel

[freedman]

Sunnysidebb said:

Im looking into it at the moment.
Another question: do I have to Pay the Balloon , if I feel it is too high will they just take the car off me. It says in the contract that the car has been hired my me and is the property of Porsche Finance and unless I have not contravened any t&C's then when the final instalment has been paid I have the option to purchase the goods for the option fee specified in the schedule. So does that mean I dont have to pay the Balloon if I give them the car back??

Hand the car back, as long as it is equal to or in excess of the value of the balloon, you just walk away

Or refinance to cover the balloon payment and keep the car for another 3 years

[aby76]

I thought that the porsche scheme involves a guareneed future value. Once the term of the agreement is reached you have 2 choices, hand the car back with no penalty or pay the balloon and keep the car. The balloon is fixed and should not change over the course of the agreement. If the scheme does not involve the gfv then you could find yourself with a car worth less than the balloon at the end of the agreement and then have to pay for someone to take the car off your hands ie balloon is £12000, car worth £8000. If you don't want to pay the £12000 then you hand back car and £4000.

[Sunnysidebb]

pioneer said:

Sunnysidebb said:

Im looking into it at the moment.
Another question: do I have to Pay the Balloon , if I feel it is too high will they just take the car off me. It says in the contract that the car has been hired my me and is the property of Porsche Finance and unless I have not contravened any t&C's then when the final instalment has been paid I have the option to purchase the goods for the option fee specified in the schedule. So does that mean I dont have to pay the Balloon if I give them the car back??
I had a statement in Feb 2010 saying the Balloon was £24,000, today its £26,040 ???
So I feel I am being taken for a ride.
Frank

Edited by Sunnysidebb on Tuesday 18th January 19:19

I'm proper confused now. In your opening post you said the balloon hasn't changed in 4 years, now you say the balloon is different to a statement last year? Which is it?

Edited by pioneer on Tuesday 18th January 19:27

Edited by pioneer on Tuesday 18th January 19:28

That’s what has triggered this hole lot off. I went in to my OPC to check how much I would have to pay in May to pay off the Balloon as the loan ends then. Last Feb the Balance was £24k +/- a few £ and the sum has gone up to £26040 today. Considering the interest rates have gone down . I was told that the balloon took up any difference in the interest rates so my monthly payment stayed the same no matter if the interest rate went up or down. I spoke to the finance company from the office at my LPC and they are going to call me back tomorrow. If it looks like I am getting ripped of they can have the car back.
I have looked every where and I cant find a definitive explanation on how exactly the Balloon works. I even spoke to the sales dept at my OPC today and they don’t seem to remember how the Balloon worked just that they don’t offer it any more. They just do a fixed interest rate with a guaranteed fixed sum to pay off at the end.
Will know more tomorrow, I hope.
Frank

[Sunnysidebb]

pioneer said:

barchetta_boy said:

I think the moral has to be read the documents very carefully before you sign them. Particularly if you are borrowing tens of thousands of pounds to finance a fast depreciating illiquid asset like a newish Porsche.

Its why I wait. And then pay cash.

Joel

Nothing wrong with finance as long as you are happy with the deal you get. OP - I hope you sort it but it sounds a bit confusing and as mentioned you should fully understand the way your finance agreement works before signing anything. If you were not described it correctly then I sympathise but if you signed the paperwork then not much you can do now....

Oh I did fully understand it at the time, just no body at the OPC seems to remember what a balloon was all about.It is in fact in the name Balloon. It expands when the interest rate goes up and contracts as the interest rate goes down leaving you not to worry about monthly payments. It seems my Balloon had been eating to many pies and has expanded when the interest rates have gone down. TBH I was hoping some one else had the same problem. My OPC did say I'm not the first to come in ans ask this question, which is why I have thrown it open to you all to have a look at.
Cheers
Frank

Edited by Sunnysidebb on Tuesday 18th January 20:42

[JM1962]

Do you know what the interest rates were that applied to your loan. Just because the BOE interest rate went down doesn't mean the finance company didn't put theirs up if you are on a variable rate. Most finance seems to be on a fixed rate in my experience.

[Sunnysidebb]

pioneer said:

Sunnysidebb said:

pioneer said:

Sunnysidebb said:

Im looking into it at the moment.
Another question: do I have to Pay the Balloon , if I feel it is too high will they just take the car off me. It says in the contract that the car has been hired my me and is the property of Porsche Finance and unless I have not contravened any t&C's then when the final instalment has been paid I have the option to purchase the goods for the option fee specified in the schedule. So does that mean I dont have to pay the Balloon if I give them the car back??
I had a statement in Feb 2010 saying the Balloon was £24,000, today its £26,040 ???
So I feel I am being taken for a ride.
Frank

Edited by Sunnysidebb on Tuesday 18th January 19:19

I'm proper confused now. In your opening post you said the balloon hasn't changed in 4 years, now you say the balloon is different to a statement last year? Which is it?

Edited by pioneer on Tuesday 18th January 19:27

Edited by pioneer on Tuesday 18th January 19:28

That’s what has triggered this hole lot off. I went in to my OPC to check how much I would have to pay in May to pay off the Balloon as the loan ends then. Last Feb the Balance was £24k +/- a few £ and the sum has gone up to £26040 today. Considering the interest rates have gone down . I was told that the balloon took up any difference in the interest rates so my monthly payment stayed the same no matter if the interest rate went up or down. I spoke to the finance company from the office at my LPC and they are going to call me back tomorrow. If it looks like I am getting ripped of they can have the car back.
I have looked every where and I cant find a definitive explanation on how exactly the Balloon works. I even spoke to the sales dept at my OPC today and they don’t seem to remember how the Balloon worked just that they don’t offer it any more. They just do a fixed interest rate with a guaranteed fixed sum to pay off at the end.
Will know more tomorrow, I hope.
Frank

What does your paperwork say that you signed? Don't forget that although bank rate has gone down it's not impossible that they have charged you more as lending is tight. I got a quote from Porsche for my recent purchase and best they would do was 9% APR, got a deal elsewhere at 4.95% APR.

That is a very good question. Knowing the greedy gits that might just be what has happened. I have been getting regular financial reports on my loan , how much I have paid back and the Balloon value( which until Feb 2010 was going down due to the interest rates going down as well). The last one said i was paying 6% and have been doing so since Feb 09 before that I was paying 8.5% which is what the rate was when I took out the loan. Notice it had dropped to 6 % which is why my Balloon has also gone down as well. Its just all of a sudden the balloon has gone back up again?? Something is not right. Your point about them increasing the rate significantly might have some validity. Seems a screw either way. If the Balloon goes up when interest rates go up and the Balloon goes up if interest rates go too low then they are not abiding by the sgreement we made. IMO
Thanks
Frank

[M3RMS]

Pioneer - can you share who's doing finance at 4.95%? I'm thinking of changing at this would make a huge difference to the numbers!

Or was it a mortgage thing?

Cheers
RS

[993AL]

As has been said, my deal (Porsche finance) was a fixed monthly amount and a fixed final payment.

I asked about all the options before taking the deal. One scenario I asked about was paying the balloon off after a year into the term thus reducing the loan amount and therefore the monthly payment. I was advised that this was not possible but was also advised that if funds were available to pay the balloon after a year (of a two year term) it would be better to settle the loan early and the interest for the whole amount for the next year would be saved.

Frank, is it possible that when you got the £24k figure that this was based on paying it off immediately (May I think you said) and earning a reduction on the interest because you settled early instead of the following Feb? but because you let it run the term your final payment is higher?

Edited by 993AL on Tuesday 18th January 23:57

[mrdemon]

no winners but the dealers buying a car on the knock.

most cars end up neg equity, so you end up giving the car back and are left with nothing.