Balloon Payment - You Still Pay Interest on The Balloon Portion, Right?
When buying a car, you have the ability to ask for a balloon payment at the end of your car loan. For example, if you buy a car worth $20,000 – you can finance $15,000 and request a final payment of $5,000 which is called the balloon. This final $5,000 is not part of your finance. You do not pay interest on it. There are normally rules as to how big of a balloon you can have, though you can quickly see the benefits in financing only a part of the car instead of the full amount.
I was quite sure that one would still pay the interest on the balloon portion, because until it is paid, it is money owed. Isn't that right?
Or perhaps there is "dealer promotion" whereby if you pay RRP of the new car, then you will be offered interest free on the balloon (which technically you still pay by not getting the possible discount on the car price).
Or is the article above totally wrong and misleading?