In short
A balloon payment is a single, larger payment due at the end of a financing term. It lowers your regular monthly payments during the term but leaves a lump sum you'll need to pay off, refinance, or roll into a new agreement when the term ends.
Instead of amortizing the full balance to zero across the term, a portion is deferred to the end. That shrinks each monthly payment, but the deferred amount — the balloon — comes due as one payment when the term finishes. At that point you typically:
A balloon can help when you need lower monthly payments now and expect stronger cash flow — or a planned sale or trade — by the time the term ends. The trade-off is that you must plan for the lump sum. It works best when the balloon is set at or below the asset's expected value at term-end, so the equipment can help cover it.
You'll usually refinance it into a new agreement, or sell/trade the asset to cover it. It's important to plan for the balloon well before it's due rather than be surprised by it.
They're related but different. A balloon settles a loan balance; a buyout is the price to own leased equipment at term-end. Both are lump sums due at the end.
General information only. This page is educational and does not constitute financial, legal, or tax advice. All financing is subject to credit review and lender approval. Rates, terms, and eligibility vary by applicant, asset, and lender, and are not guaranteed. Any figures or examples are illustrative. Please speak with a qualified advisor about your specific situation.