Balloon Payment
The balloon payment is the large pre-agreed lump sum due at the end of a PCP deal if you want to keep the car — also called the optional final payment, and based on the Guaranteed Future Value. At term end you have three choices: pay it (often by refinancing) and keep the car, hand the car back and walk away, or part-exchange it — using any equity above the balloon as a deposit on your next car.
Example
A 3-year PCP with a £13,500 balloon: pay £13,500 to own the car, return it, or trade it in if it’s worth more than £13,500.