But there are certain limitations to keep in mind. First of all, in a standard lease, you don't own the car at the end. To understand what a balloon payment is, you need to start at the beginning of the leasing process.
Leases start, like any other deal, with the selling price of a particular car.
From that price, a residual value, usually the predicted value of the vehicle at the end of the lease, is calculated. Depending on the interest rate involved and the amount of money, if any, you put down, you will get a certain monthly lease payment. Destination charges, acquisition fees, security deposits and any taxes can be paid up front or rolled into the lease. Subsidized leases allow dealers to lower payments by artificially raising residual values or lowering the car's initial, also known as capitualized, cost through dealer incentives. Generally, subsidized leases are the nationally or regionally advertised specials most often associated with leasing.