Car finance 2021
Car finance showed that 88% of Brazilians intended to change their car in the following year. Whether for a new, semi-new or used model, most of these people would not be able to make a cash purchase, which makes financing a Car finance the best alternative to realize this dream more quickly.
The big question is: how to be approved for financing? Throughout this article, we will clarify exactly which types of credit are offered in the market, their advantages and disadvantages, in addition to the characteristics of each one. We will also bring you tips on how to increase the chances of having your application approved by banks.
Finally, we will highlight some points of attention when choosing the ideal Car finance , such as payment term, number of installments, bank reliability, among others. After all, this is a financial commitment of significant amounts, and it is essential to avoid any problems in the future. car finance
For starters, let’s technically explain what a car finance is. Good reading!
Car finance is a kind of loan so that a person can buy a new, used or used vehicle. This credit is provided, in Brazil, by public and private financial institutions – such as banks and credit cooperatives.
Often, those interested in buying a car save part of the value of the property, paid as input , and the funding is only to pay the remaining cost of the car. Here’s an example: if the car costs $35,000, and the buyer has $10,000 available, he can give that amount as a down payment and finance the remaining $25,000.
How does it work?
Car finance is made from different types of credit. Anyone who doesn’t want to spend a lot of time hanging on paying for the vehicle can finance it in 12 months. But those who don’t have bullet in the needle to pay a higher amount each month, can extend the financing for up to 48 or 60 months , on average. In this case, the interest charged over time makes the loan a little more expensive.
Several issues are evaluated when granting a loan. Although this process is quite quick, in most cases, each financial institution works in a different way, and the registration approval time may vary.
Among the decisive factors when having an approved credit application , the following stand out:
- good monthly income (the bigger the better);
Car finance (the more traditional and well-established in the country, the greater the chances of approval);
auto insurance included in the financing;
good value for entry .
How to facilitate car finance approval?
Below, we explain how to facilitate the financing approval process , based on the most relevant factors for car finance institutions when granting credit. Check out!
- Clean name in credit protection services
car finance clean name is proof to the market that you are a trustworthy person when doing business. This is not to say that those with the dirty name are bad—many people experience momentary financial difficulties that cause them to default.
- This happens when someone fails to pay their bills on time and creditors (those to whom the consumer in question owed them) notify entities, such as the Credit Protection Service (SPC) or Serasa Experian, about it.
- When you “enter” the SPC or Serasa, as the people usually say, your name and your documents are entered in a debtor register . This makes life very difficult, because no one is willing to do business with someone with a dirty name , for fear of not receiving payments on time.
- This is understandable, even if, most of the time, these delays or non-payments are due to loss of income or another situation that forced someone to stop keeping their commitments. Still, it’s pretty hard for a person with a dirty name to get approved when looking for car financing .
The score is a score that everyone gets, even if they don’t know it. The financial market evaluates us as more or less trustworthy people, based on a series of factors, such as payment of bills on time, income, repayment of loans, among others. This score can reach up to 1,000. The higher it is, the more companies we have financial relationships with trust us.
car finance which we talked about in the previous topic, is the company responsible for this score. Generally, Brazilian banks hire Serasa precisely to have access to the data it has about the market, which is very useful when taking some decisions, such as whether or not to lend money to customers .
Before you even go out to ask for financing to buy a car, you can check your score on the company’s website , without having to pay anything. Just create an account with the requested data, and you can already get an idea of how the market sees your financial condition. https://www.buyacar.co.uk/cars/cheap-cars/cars-under-200-per-month
Check what is taken into account in the score:
accumulated debts — those who already have a large amount of loans, installment purchases and other financial commitments may end up with a reduction in their grade;
use of overdraft — those who use overdraft very often also end up having their score lowered. After all, it is also a type of credit, however, it indicates difficulties in having money in cash (lack of liquidity);
negative name — having the name entered in the SPC or Serasa is one of the biggest points reducers when building the credit score . Prevent this from happening to the fullest by always paying your bills on time. Do not make financial commitments greater than your ability to pay. Even because it is not enough to pay the bill for the score to go up again. Although it drops quickly when a billet expires, it is not resumed immediately after catching up on the bills;
card limit usage — consuming the entire credit card limit is yet another factor that impacts anyone’s credit score . Avoid reaching this level as much as possible.proven incomeHaving a good income is one of the most important things when applying for a loan. After all, what matters for the bank, in the end, is making sure that its customers are able to pay the monthly installment payments . But there’s no point in having a great source of income and not being able to prove it.Many informal and independent professionals manage to do well in the market, earning even more than in formal jobs, with a formal contract. Still, having some kind of formalization of how much is earned every 30 days is decisive for loans to be granted.There are institutions that lend money even without so many guarantees, but they compensate for the risk by increasing the interest rate , which is not interesting for those who hire the loan, do you agree?The first is that the need for credit decreases, which increases your chances of being approved. The second is that the values of the installments are smoother, so that the rest of the payment can be completed without tightening. The third is that the financing is paid off more quickly .If possible, the ideal is that at least 50% of the value of the car is paid as down payment. If this is too high a price, try to pay at least 30% upfront so that the financing doesn’t stretch too far and doesn’t get so expensive over the years.car finance reductionWhen buying a car, even if it is not a popular line and has a higher value, it is possible to negotiate a price reduction. This becomes easier if you know a little more about the car market and understand how the sales process works.The first step is not to fall for the sellers ‘ “labour” . Especially those who buy a used or used car are usually pressured with phrases like: “I already have several interested in the car”, “I can only hold it for you until tomorrow”, “this price is only valid today, tomorrow it will return to the most expensive value”, among other well-worn sales tactics that no one should succumb to.
In fact, they only do this because approximately half of those interested in a car no longer return to the store after a first visit. That is, some sellers try to pass the pressure they arecar finance to the buyer.
Another important detail: don’t feel guilty about asking for discounts on the purchase of the car, imagining that the seller will lose his commission. The truth is that many used and used car dealerships and dealerships have extremely high profit margins, making it perfectly viable for them to offer good discounts and still earn a lot of money in the negotiation.
It’s also important that you know the maximum amount you’re willing to spend, but you don’t have to tell the seller this. That’s because he will always try to reach this value, even if you can buy a good car for less than you intend to invest.
Another tip to get a good value when buying a car is to try to close the sale in the last days of the month. This works because many sellers have goals to meet, and negotiation becomes easier when they have a tight deadline to close the deal.
How to choose the ideal car finance?
Throughout the article, we have already explained why to finance a car , the main modalities and what to do to have the application approved by the banks. But one essential point is still missing: choosing the ideal financing for your profile . Read on to learn more!
When it comes to hiring a loan, there is no way: either you will pay faster, with a higher amount in the installment each month, or it will take a few years to complete, but paying less every 30 days . But this is not the only thing that must be taken into account when thinking about payment deadlines.
The longer it takes to pay off the loan, the higher the interest charged by the financial institution. Of course, as we’ve already mentioned, interest rates vary from bank to bank — some charge a little more, others charge a little less. However, everyone will have this fee added to the loan.
The value of a loan installment should never exceed 30% of your total income. In fact, the best thing is that it’s much less than that. In fact, this is a factor considered when granting credit to anyone. When informing the monthly income and understanding that the cost of each ticket will be higher than 30% of the income, there is a great chance that the financing will be denied .
For example, whoever earns R$3,000 a month must commit to a maximum monthly installment of R$900.00 when taking out a vehicle loan. This, of course, if this amount is available after all fixed and variable bills are paid — housing, food, health, education, telephone, internet, among other costs that the person may have.
Interest rates are present in CDC and leasing , two of the most popular ways to finance cars in Brazil. They are calculated based on the Selic Rate, which is controlled by the Central Bank. This amount varies with economic conditions and can change significantly over the course of a year. Recently, due to the weak economic performance in the country, interest rates have been reduced , in order to stimulate credit taking and investments by companies.
This can also be taken advantage of by those who are thinking of buying a car , as the Selic also impacts the interest rates charged on vehicle financing. In 2019, a car worth R$40,000.00 started to cost approximately R$4,100.00 less when being financed in 60 months via CDC.
Another fundamental detail that anyone interested in financing should pay attention to is taking out insurance. If something happens during the period of payment of the installments – illness, disability or even death – the financing must be paid by the heirs or financial responsible, under penalty of loss of the car, if the property is not insured.
Although it is not mandatory, taking out insurance for financing is highly recommended precisely because you never know what tomorrow is. Even if something more serious does not happen, there is always the possibility of losing your job or income, which will certainly make it difficult to honor your monthly installment payments. With insurance that covers the loss in these situations, as long as they are duly proven, this loss does not occur.
Finally, it is also very important to have access to financial institutions known in the market, with proven tradition, reputation and seriousness . Borrowing from moneylenders or other unreliable sources can be a shot in the foot for anyone, especially if they have trouble paying the installments.
If you suspect something, make sure that the bank or institution is duly accredited by FEBRABAN and has a good reputation with its customers. Try to establish a transparent relationship and know that your rights will be guaranteed in any situation. This is the best tip you can give to anyone who wants to finance a car .
Did you like the content? We try to clarify the main points regarding the approval of the request to finance a car. There are several details that can prevent the loan from being granted, however, they can and should be resolved by the interested party.
Sometimes, some nonsense, like forgetting to pay a bill, can affect our score , or even the chosen car brand can make the process difficult. Therefore, we have tried to include the main points in the text, with the intention of helping to make this request simpler and faster.