Buying a car requires financial discipline, research and awareness of the extra expenses that a car brings. However, it is very difficult to have the money in full to make the purchase of the car.
This is normal and does not mean that you cannot realize the dream of owning your own vehicle. There are other ways to achieve your goal. The best known are car loans. But did you know that there is more than one type of payment method? Tom Wilcher has sorted out the main types of car finance so you have no more questions!
Car financing: which type to choose?
The three most common financing models are: Direct Consumer Credit ( CDC ), Leasing and Consortium . Which one is best suited for your situation?
The best known method of car finance is the consortium. It is suitable for those who do not need the car in the short term, as it is not possible to know when the consortium will be contemplated. It is a modality that has financial advantages because it has lower interest rates than the other financing mentioned.
How Car Pool Works
The consortium system is a kind of collective savings . Participants (consortium members) contribute a fixed amount each month to buy a car. The vehicle does not need to be determined in advance, the person contemplated can use the value to acquire the model you want. It all depends on how the consortium is set up. Remember that the prices of the parcels may vary, up and down, depending on the price of the car, tax reduction, etc.
A consortium can last up to 84 months and an administration fee is charged by the person providing the service. Those who fail to pay the benefits will be considered an excluded consortium, and will participate in monthly draws among others excluded, being entitled to the amounts already paid by him and with penalties provided for in the contract.
Contemplation occurs in two ways:
- Draw: A draw is made each month among participants who are still active and on time. Whoever gets the full amount or the car in advance.
- Bidding: An active consortium member may also bid to receive the good / value in advance. The choice of bid to be contemplated is stipulated in the consortium contract.
Advantages and disadvantages of a consortium
In addition to presenting low interest rates (or no interest at all) and values usually lower than other financing, the consortium also has other advantages:
- Diversity of plans: Before signing the contract with the authorized administrator, you set the amount of the installment and number of monthly payments.
- Less paperwork: Proof of income is not usually required to enter a consortium.
- Long-Term Planning: Because a consortium is a kind of savings, you learn to handle money more responsibly if you are forced to set aside a portion of your earnings for the car’s investment fund.
The consortium also has other disadvantages, besides the possible waiting time to achieve the good:
- Default risk: This can be for you, who are not used to making a monthly reservation, or for other group participants. If other participants fail to pay their respective installments or decide to leave the consortium, all other participants will be harmed.
- Difficulty in giving up: Normally, if a consortium member gives up on being in the consortium group, the quota must be sold to someone else.