Finance A Car: Know The Most Common Ways

Posted by LouisWillis on November 26th, 2020

When buying a new car the most important point, after choosing the ideal model, is the way the buyer will make the payment. Most of the time, the best option is to opt for financing, since there are numerous advantages in the procedure. Thinking about it, Fairsquare separated the most common ways to finance a car, showing the tips to buy safely and make it easier when buying a new car!

Do you know how it works to finance a car?

Financing of new or used cars is done through lenders or banks, whether public or private, that analyze the salary of the possible buyer and then assess whether the credit will be approved or not. The financier or bank in question, makes the full payment of the value of the vehicle, and enters into a contract with the buyer, so that he pays in installments the value of the acquired asset; the amount and amount of benefits is calculated from the assessed salary.

When analyzing the negotiation, the buyer's available capital and the possible ways of paying the financing, the company directs the customer to the best condition to finance his car, in a way that favors both parties.

Do you know what are the most common types of financing?

Financing can be done in the form of CDC (Direct Consumer Credit), Consortium or Leasing. And they work as follows:

CDC (Direct Consumer Credit)

Despite having a slightly higher interest rate than the other forms, the CDC is the most common and well-known form of financing and consists of borrowing the total value of the vehicle to be purchased. Each institution offers a different form in the amount of installments and interest rates, in addition to the IOF (Tax on Financial Operations) rate, so it is essential to evaluate the company that will carry out the financing and the conditions provided in the contract.

In this financing, the vehicle documents are immediately in the buyer's name, but the transfer of the vehicle to another person's name is not allowed, as the car is sold to the bank, a situation that is only reversed at the end of the payment of all installments . The interest rate is fixed and does not change under a signed contract.

Leasing

Leasing means a lease or finance lease. It consists of the financing in which the company, unlike the CDC, keeps the documents in its name until all installments of the vehicle are paid, that is, the buyer makes a kind of rental of the vehicle during this period, being able to transfer it to his name as soon as the payment process is closed. Leasing becomes financing only from the end of the process, in which the current lessor decides to buy, in fact, the vehicle.

Leasing is a good alternative for those who do not have the down payment (which is necessary in common financing) since the amount is paid in full by the institution and also becomes cheaper due to not being influenced by the IOF.

Consortium

The consortium, different from CDC and Leasing, is made in a more planned way and through groups. The buyer and others who wish to purchase a vehicle contribute monthly installments to form a kind of joint savings. Each month a draw is held to choose the person who will be awarded the letter of credit (equivalent to the value of the vehicle). The draw is carried out once a month and to speed up the process, the buyer can make bids on his own capital and just like in an auction, the higher value is more likely to be contemplated.

For those who will exchange a vehicle, some financial institutions or banks offer the option of using the value of the sale of the old car to make a bid.

The consortium's advantages are due to the absence of interest rates and flexibility in the number of installments. There is only the payment of an administration fee which is the fee for the administrator of the consortium group due to organization, realization and the reserve fund fee, which is used according to the group's need and if not used, is refunded to each of the members

There are countless ways to exchange or invest in a new vehicle. With some planning or not, the forms of financing are increasingly flexible for customer satisfaction. The Fairsquare works with the best financial and financing options, as well as take care of all the paperwork of your vehicle, became interested?