Better understand the difference between these two products and see which option is best for you!
Consortium and financing are the two best known ways in the market to buy a cashless car for cash payment. You need to take into account your personal budget, the maximum amount you can afford, and also think if there is a need It is urgent to purchase the vehicle and compare which is the best option to have a vehicle in your case.
In this operation, the bank lends the total value of the vehicle and makes the cash payment to the store of your choice. After that, you must pay the institution the value of the vehicle with interest through monthly installments until you can repay all the debt.
Vehicle financing usually takes between two and five years. To be able to buy a car for financing, you need to have a clean name and have a good net income, as the bank does a credit analysis to approve the deal and to set the installment values.
If approved, the bank will charge monthly interest, which makes the debt more expensive than the amount borrowed. In addition, most banks and lenders charge a down payment to finance the vehicle.
Before opting for a loan, it is important to do the simulation, having a sense of the value of the installments and find out how much you would need to provide and how much money you need to set aside monthly to pay the installments and avoid getting the name dirty.
Another important point: As long as the vehicle is not 100% settled, it will be in the name of the bank, so that the institution can recover the property in case of non-payment.
Pay attention to the fees charged by banks, which add extra costs to the value of the installments to camouflage interest. Institutions usually do this in two ways: by charging the credit opening fee or by the difference between the spot and forward price difference.
Advantages of Financing
– You can leave with the store vehicle as soon as the financing is approved;
– The financing time varies between two and six years, depending on the bank rule.
Disadvantages of financing
– Interest rates are very high;
– You have to go through a very bureaucratic process to approve funding.
You need to take into account your personal budget, the maximum amount of the installment you can afford, also consider if there is an urgent need to purchase the vehicle and compare what is the best option to have a vehicle in your case.
A consortium group is made up of people interested in financing a vehicle of the same value. All people pay monthly installments to the consortium management and have equal chances to get the vehicle through a draw. When the sum of the payments of the installments paid reaches the desired vehicle value, one of the participants is drawn and can buy the vehicle.
In a consortium, there are also possibilities to bid, offering a higher payment than the monthly installments. The highest bidder gets the letter of credit to buy the vehicle and does not have to participate in the traditional draw of this type of operation. When contemplated in a consortium before paying off the desired car value, the car is also in the name of the trustee, as well as in the financing, to avoid delaying or defaulting on the debt.
If a consortium lasts for 48 months, for example, the person may be drawn in either the first or last month.
– The rates are lower, about 20% more than the value of the chosen vehicle;
– It is possible to enter a consortium already in progress, in which case the time of the consortium is reduced;
– It is possible to use the consortium as a way to apply money or make a medium or long term planning.
– There is no way to have the vehicle right away. You must be drawn or bid for the purchase;
– Giving up a consortium is not simple, you need to pass the quotas to someone else;
– When it comes to receiving the letter of credit for the purchase of the vehicle, the requirements are high, although there is not so much collection of documents to enter a consortium.
Interest x Management Fee
The main difference between financing and consortium is that the former charges interest, whereas the latter charges an administration fee on each installment of the operation. Both operations make the debt greater than the value of the car.
Generally, administration fees have a lower cost than financing interest, in short, you would pay less in the final amount in a consortium. However, it is important to pay close attention before joining a consortium, as some administrators charge other costs on installments, so consider the costs of the contract and before signing take any questions.
There is no membership fee charged by the administrator of a consortium, but the company may charge a higher amount in the first installment to cover certain group expenses and pay its representatives. The amount is deducted from the entire consortium group in the final amount of the administration fee.
Even with the problems mentioned above, the rates of the consortium are usually lower than the interest on a loan.
What is the best business option?
As usually those looking to buy a vehicle without money, has as one of the main reasons the urgency to have the car, financing is more game. In this model it is much easier to have the car at your disposal right after completing the operation to start paying the installments.
If you can wait, consortium is the best option, this way is often cheaper for your pocket and will help you create the custom of saving money.
Despite being more expensive for consumers, vehicle financing accounts for almost 80% of car purchases , being the model best known and used by national citizens.