end of-term
What happens at the end of an asset finance term?
Short answer
At the end of the term you have three options: pay out the balloon or residual in full, refinance the balloon into a new term, or sell or trade the asset and use the proceeds to clear the balance. The maximum balloon allowed depends on the term, from 65% of the asset value on a 1-year loan down to 30% on terms of 5 years or more, and it is calculated on the asset's value rather than the amount financed.
Last reviewed 8 September 2026 by AssetMX.
Direct answer
When an asset finance term ends, there are three usual paths: pay the outstanding balloon or residual amount in one lump sum, refinance that balance into a new loan term, or sell or trade the asset and use the proceeds to clear what is owed. Which option makes sense depends on the size of the balloon, the asset’s condition and value at that point, and whether the business still needs the asset.
How the balloon size is set
The maximum balloon or residual allowed is linked to the loan term and is calculated on the asset’s value rather than the amount financed.
| Term | Maximum balloon (% of asset value) |
|---|---|
| 1 year | 65% |
| 2 years | 60% |
| 3 years | 50% |
| 4 years | 40% |
| 5 years or more | 30% |
A longer term generally means a smaller balloon relative to the asset’s value, because more of the asset’s expected depreciation has already been repaid through regular instalments.
Paying out the balloon
If the business wants to keep the asset, the balloon can be paid in full as a lump sum at the end of the term, at which point the finance is closed and the asset is owned outright.
Refinancing the balance
Where paying the full balloon is not practical, it can often be refinanced into a new loan term, spreading the remaining amount over further instalments. Structure and rate depend on the lender and the asset’s condition at that time.
Selling or trading the asset
The asset can also be sold or traded in, with the proceeds used to clear the outstanding balloon. This is common where a business is upgrading equipment or a vehicle at the end of its useful life for that business.
Early payout
Early payout before the term ends is allowed on chattel mortgages, though a lender break cost applies and the amount varies by lender and by how much of the term remains.
Where to next
For more on how balloons work day to day, see what is a balloon payment, or compare structures on chattel mortgage vs finance lease.
This is general information only and does not take your circumstances into account. It is not financial, tax or legal advice.
Sources
Related questions
Can I pay off an asset finance loan early?
Early payout is allowed on chattel mortgages. A lender break cost applies and the amount varies, so it is worth confirming with the lender before deciding.
Is the balloon calculated on what I borrowed or the asset's value?
The balloon is calculated on the asset's value, not the amount financed, so it is set with reference to what the asset is worth rather than the loan size.
What if the asset is worth less than the balloon when the term ends?
This is a risk with any balloon structure. Speak with your lender well before the term ends about refinancing or trade options if you are concerned about the asset's likely value.
Ready? Three questions, then we take it from there.
One flat $800 fee, disclosed before you start. Nothing touches your credit file until you say so.
Trading 2+ years · Clean credit · Vehicles, trucks or equipment for business use