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In 2023, the Car Consortium Sector Grew 25.6%, Moving R$ 316.7 Billion, But Still Raises Questions When Compared to Financing.
Amid the search for affordable ways to acquire a vehicle, many Brazilians are turning to the car consortium as an alternative to traditional financing. In 2023, the consortium sector moved R$ 316.7 billion, a growth of 25.6% compared to 2022, according to data from the Brazilian Association of Consortium Administrators (ABAC). However, this mode of acquiring goods still raises many questions. This article explores the positive and negative aspects of the car consortium to help you make an informed decision.
What Is a Car Consortium?
The consortium is a collective purchasing system in which a group of people comes together to acquire an asset, in this case, a car.
Each participant pays monthly installments, and through draws or bids, one or more members are awarded the credit letter.
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Simply put, the operator collects the money from the installments of all participants and draws the credit letter with that amount.
Each member receives their credit letter, some sooner, others later, depending on luck or their bid.
Advantages and Disadvantages
One of the main advantages of the consortium is the “absence” of interest, which is present in traditional financing.
Instead, the operator charges an administration fee.
If you have managed to gather an amount beyond the installments, you can place a bid and be contemplated more quickly, increasing your chances of obtaining the credit letter sooner than expected.
With the credit letter, you can purchase the vehicle you want and still have the possibility to negotiate your purchase as if you were paying in cash, which can result in better buying conditions.
However, the biggest disadvantage of the consortium is the waiting time. Contemplation can take years, depending on luck and the number of participants in the group.
If you need the car quickly, this mode may not be ideal.
Although the administration fee is generally lower than the interest on financing, it still represents an additional cost.
Depending on the operator, this fee may increase; therefore, it’s important to pay attention to the contract to avoid surprises.
Just like in financing, if you are unable to pay the installments, you may lose the credit, not receive the total amount you paid up to that point, and still have a negative credit score. Defaulting is a risk that needs to be considered.
Comparison Between Consortium and Financing
In financing, you pay interest, which can be high depending on market conditions and your credit profile as shown at market rates.
In the consortium, you pay an administration fee, which tends to be lower than financing interest.
In financing, you obtain the car immediately after credit approval. In the consortium, you may wait months or even years to be contemplated unless you are lucky or can make a significant bid.
Financing offers less flexibility in terms of payment and price negotiation.
In financing, the risk lies in high interest rates and the possibility of failing to meet the installments. In the consortium, the risk is defaulting and waiting time to be contemplated.
Tips for Making a Good Choice
Before entering into a consortium, research the reputation of the operator. Verify if it is reliable and has a positive history with its customers.
Read the contract carefully before signing. Understand all the fees involved, the contemplation period, and the payment conditions.
Plan your finances to avoid defaulting and ensure that you can meet the payments until the end.
If you can wait to acquire the car and prefer to avoid financing interest, the consortium may be a good choice. Otherwise, financing may be more suitable for your needs.
The choice between car consortium and financing depends on your profile and needs.
The consortium offers advantages such as absence of interest, financial planning, and negotiation power, but has the disadvantage of waiting time and the risk of default.
Financing allows immediate acquisition of the car but comes with interest and less flexibility.
In the end, it’s important to consider all factors before making a decision. Research, plan your finances, and choose the option that best meets your needs and goals.
What Is the Best Option in 2024?
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