When it comes to buying vehicles, Brazilians have a number of options available to get a car, but two tend to be the most popular among the general public. To give you a definitive answer about consortiums or financingOur experts cover all the key points about each of these modalities. 

Today, Brazilian consumers basically choose between two options when buying a car on credit: consortium or financing. 

You've probably already stopped to think about which of the two would be better, haven't you?

The answer our experts give to this type of question is: it depends on the buyer's objective. 

However, the answer to this simple equation boils down to two important nuances: cost and time. 

In today's article we will (try to) answer this crucial question that plagues most people who want to buy a vehicle. 

When you ask this type of question to a mathematician or an economist, they will tell you that neither option is good. 

Ideally, you should save money to buy the car outright with cash on hand, which is best done with good financial planning, and you need to be patient and reassess whether you really need to buy the car through a consortium or financing. 

In other words, the same old story. 

But when the item to be purchased is of high value, few people will be able to save up and buy everything in cash, so resorting to a consortium or financing is something that, in popular jargon, many would say is: just part of the process. 

Consider the following example: A house, which is a property for housing and somewhat expensive, needs a financing or a consortium to be purchased, and the same is true when we talk about a car. 

After that introduction, we'll show you what to consider in each of these two options. Let's go?

A consortium is made up of a group of people who come together with the same goal. In this case, buying a car. 

In this way, consumers use an administrator to hold money for a purchase; when there are funds available, the purchase is consequently made. 

In layman's terms, a consortium is a collective fundraising effort. It's a planned purchase for those who have a financial plan and are not in a hurry or have an immediate need to own a car. 

An important point about consortiums is that they don't have interest, but rather an administration fee, which is charged throughout the client's participation period. 

Currently, this administrative cost is less than 0.2% per month, but for those with financial planning, it's something that needs to be taken into consideration. 

In the case of a consortium, the client is selected, that is, receives a letter of credit for the value of the chosen asset through a draw or bid, similar to a vehicle auction. 

These two processes happen once a month. There are even consortium administrators who accept used vehicles as bids, which can make life easier for those looking for a consortium to change cars. 

However, as with any type of negotiation in Brazil, it's not all roses. 

To protect themselves and avoid problems, before joining any consortium, consumers should visit the Central Bank's website and verify if the consortium administrator is authorized by the institution. 

On the Central Bank's website, it is also possible to check how many complaints the consortium company has. 

And we also want to warn about a new scam involving consortiums: the sale of awarded quotas, something that simply does not exist. 

Here's an interesting tip: If your goal is to save money to buy a car, instead of paying installments on a consortium, you can put your money into some type of investment every month. 

It could be a CDB, a CDI, an LCA, an LCI, or even a good old savings account. All these options offer some type of financial return. 

If you're very unlucky and don't want to bid in a consortium, this investment option is valid because there's no administration fee like in a consortium. 

If you are only drawn at the end of the consortium, you will have spent more money than you could have saved. 

Now that we've shown you everything about the consortium, it's time to talk about financing. 

To continue the discussion: consortium or financingNow it's time to talk about the second option. 

One important point about this form of purchase is that it has a major advantage over a consortium: immediate possession of the vehicle. However, this comes at a price – which is usually more expensive!

We can say that there are three types of financing. 

The first one is the most common, in which the financial institution provides credit with normal market interest rates. 

There are also manufacturer-subsidized consortia, with lower rates and, on special occasions, even zero rates. 

And lastly, there's financing that guarantees the repurchase of the vehicle. In this last option, the customer usually uses their own car as a down payment when trading it in for another brand new vehicle.

This type of buyback operation is widely used in other countries. It is very similar to operating leases. 

It is advantageous because the customer always has a new car in a short period of time, depending directly on their financial capacity. 

When choosing a loan, consumers should always look beyond the interest rate charged by banks or financial institutions; they should also consider the Effective Cost of the Transaction, or the well-known CET. 

The CET (Total Effective Cost) includes fees and taxes charged in the financial transaction. 

To avoid confusion and information overload regarding interest rates and CET (Total Effective Cost), what really matters is the final installment amount of the loan. 

If, for example, a customer wants to buy a car for R$ 30,000 and has R$ 10,000 in their account for a down payment, they need to check the monthly payment and compare it. 

It's basically what people do when they're going to buy a TV or a refrigerator; they compare how much they can afford. 

All financing will require a certain percentage of... ProhibitedThis is a form of security and amortization of installments. 

Loans are known for their high interest rates. Therefore, the longer your loan term, the more interest you will pay. 

There are situations where you end up paying twice the value of the car. Therefore, observe everything very calmly and carefully before committing to financing. 

After all this, it's time for the final verdict: what's the best option when buying a car, a consortium or financing?

So let's get to the straightforward answer:

Need a car as soon as possible? We recommend financing, although it has a higher cost, even with falling interest rates. 

Not in a hurry and have time to plan? Then choose a consortium! 

In short, it all depends on each person's reality and current situation. 

Now that you know how to choose between a consortium or financing, how about learning about an option where you can lease a vehicle for a specific period and, at the end of the lease, choose to buy the car!

This refers to leasing. While it's becoming less common, it can still be used by those who like and need cars, but aren't physically attached to their vehicles. 

To learn more about this option, simply click below!