A PCP has a lump sum at the end called the balloon payment, or more formally the Guaranteed Minimum Future Value (GMFV). It is what you would pay to keep the car.
Here is the bit that makes PCP make sense: your monthly payments are not chipping away at the full price of the car. They only cover the depreciation — the gap between what the car cost and what it is expected to be worth at the end — plus interest on the whole balance. That deferred chunk is the balloon, and it is why PCP monthlies are lower than hire purchase on the same car.
Estimate your balloon payment
If you already know your GMFV, use that figure — it is on your agreement. This estimates what remains outstanding at the end of the term based on your payments.
Your three options at the end
1. Hand the car back and walk away
You owe nothing more, provided you are within your mileage allowance and the car is in fair wear and tear condition. This is the option people forget exists. It is also the one that protects you when the market has moved against the car — if it is worth less than the GMFV, that is the lender's problem, not yours.
2. Pay the balloon and keep the car
Pay the GMFV, by cash or by refinancing it, and the car is yours. This makes obvious sense when the car is worth more than the balloon, and it also removes any excess mileage charge entirely — worth remembering if you are heading well over your allowance.
3. Part exchange and start again
The dealer settles the finance and puts any equity — the amount the car is worth above the balloon — toward the deposit on your next car. This is the most common route, and it is where knowing your equity position genuinely changes the deal you get.
The GMFV is a floor, not a ceiling. It guarantees the lender will take the car back in settlement of that amount. If the car turns out to be worth less, you are protected. If it is worth more, the difference is yours — but only if you actively claim it by part exchanging or selling rather than simply handing the keys over.
Why your balloon is the size it is
Lenders set the GMFV by predicting the car's value at the end of the term. Three things drive it:
- How well the model holds its value. Strong residuals mean a high GMFV, low monthlies, and a big lump sum at the end.
- Your mileage allowance. Lower agreed mileage means a more valuable car at handback, so a higher GMFV.
- The length of the term. Longer agreements mean more depreciation absorbed in the monthlies and a smaller balloon.
A low monthly payment with a large balloon is not a cheaper deal — it is the same depreciation arranged differently, with more of it deferred.
Don't let the balloon arrive unannounced. The end of a PCP is a decision point that rewards a few months of notice: time to get the car valued, compare refinance rates, and decide whether to keep, return or part exchange. Deciding in the dealership on the day is how people end up in whichever deal suits the dealer.
Common questions
Do I have to pay the balloon payment?
No, it is entirely optional. Hand the car back within your mileage and condition terms and you owe nothing further. Pay it only if you want to own the car.
Can I pay the balloon early?
Yes. You can request a settlement figure at any point, which will be less than the balloon because it reflects the interest you have not yet incurred. Under the Consumer Credit Act you are entitled to an early settlement rebate.
Can I finance the balloon payment?
Usually. Many lenders will refinance it into a new agreement, and dealers will often arrange something. Compare the rate against an ordinary used car loan first — refinancing a balloon is not automatically the cheapest option.
What if the car is worth less than the balloon?
Hand it back. That is exactly the scenario the GMFV guarantee exists for, and the shortfall is the lender's risk. Paying a balloon that exceeds the car's value makes no sense unless you have a specific reason to keep that particular vehicle.
Is the balloon payment included in the VT 50% calculation?
Yes. Voluntary termination is based on the total amount payable, which includes the balloon, since it forms part of the credit advanced. That is why the VT halfway point falls later than half way through the term on most PCP deals. See our VT calculator.
Know your balloon and your equity
Motorise tracks your final payment and shows what your car is worth against it, so you reach the end of the agreement already knowing which of the three options is right.
This calculator gives an estimate for general information and is not financial advice. The figure shown models the outstanding balance at the end of your term from the payments you enter; your contractual GMFV is set by the lender in advance and is stated on your agreement — use that figure where you have it. Always confirm with your finance provider before making a decision.