This question is quite common among those looking to finance a car, motorcycle, or even a property for the first time. Straight away, that is, objectively, we can see that each has its advantages and disadvantages, and therefore, you should compare them based on your actual needs.
So, pay attention to all the details we'll cover here about these two financial transactions that deserve careful consideration. One of the most important things to remember right away is: "How important is your financing?" What is the real need for this asset? Is it for immediate consumption, or can it wait? Yes, you need to ask these questions before finally taking out your financing or even your consortium.
So let's get to the clarification, and who knows, maybe you'll decide what to do based on this post:
Financing or consortium, understand the difference
Look, folks, it's common knowledge that with financing, a financial institution (FI) lends you the funds you need to purchase your car now, and you repay these funds to the FI in monthly installments, usually a fixed amount (calculated using a system known as "Price"), over a set term, plus interest. The Financial Transactions Tax (IOF) and other fees are also levied on financing.
For this simple reason: to facilitate comparison between FIs, we must use another rate, called the Total Effective Cost (CET). If, during the repayment period, you receive additional funds and decide to pay off installments early, you will receive a discount on the interest on future installments you are paying early, thus reducing the total term of the financing or the amount of the remaining installments.
A consortium is a group of people interested in acquiring something.
Typically, a vehicle consortium is the most popular. People come together, organized by a consortium administrator, to help each other buy their respective cars. The vehicle's value is divided among the number of participants, and each month, one participant will be drawn to receive the funds from the others to purchase their car.
And so on until all participants have been selected. You could be the lucky winner of the first month or have to wait until the last month to purchase your car.
Therefore, there is no interest added in this modality, but the administrator charges an administration fee to manage the consortium. In addition to this fee, there may also be a membership fee, reserve fund, and insurance.
Please note, just to be clear: the percentage of your monthly installment is fixed, but the amount may change if there is a change in the price of the car.
Therefore, if you want to increase your chances of winning, you can place bids, which is an amount you pay in addition to your monthly installment, and compete with other bidders to determine the winner for each month's bid. Remember that in this case, there will be no deduction for the administration fee from the bid amount, but your payment term or the amount of future installments will be reduced proportionally to the amount of your bid.
Therefore, the decision between financing or a consortium depends primarily on your urgency to purchase the car. Let's now look at some examples to better understand the cost of this temporary decision.
Let's simulate that the reader wants to purchase a vehicle for R$ 50,000.00
In this example, the buyer has no down payment. When researching the options, we found 60-month financing with an APR of 2,001 TP3T per month and consortiums with the same term with an administration fee of 18,001 TP3T. We'll assume that, over these 5 years, the value of the desired car will remain the same, or that the value of the consortium's letter of credit will remain at R$ 50,000.00.
The financing will be in fixed installments of R$ 1,438.40, therefore a total disbursement of R$ 86,303.90 but with the purchase of the car in the present.
Got it? If you have any questions, leave your comment!