Why Car Finance More Interest
Car Financing: DON’T follow these 5 tips and pay up to 735% more interest
Doing the online simulation and calculating how much down payment and how much you will pay in installments will help you get the best deal` Car Loan
By Camila Torres
16.11.2020 at 14h:44 • Att. 7 months ago
Doing the online simulation and calculating how much down payment and how much you will pay in installments will help you get the best deal
Car financing, also known as Direct Consumer Credit (CDC), is a type of loan given by a public or private bank to pay for an automobile.
Thus, when a consumer finances a vehicle, he is not indebted to the dealership or store, but rather to the financial institution where the loan was arranged. It is even possible to contact the bank of choice directly to make the financing, without having the concessionaire as an intermediary.
Check your car’s value on the Fipe Table
Financing is available for all needs, even with no down payment or no CPF and approval is possible. But beware: the lower the guarantees and the level of reliability assessed by the financial institution, the higher the fees and interest. After all, it is necessary to compensate for the default risks.
Clarifications made, let’s get to what really matters: helping you get a good loan. Here are five valuable tips to pay a lot less interest when financing a car.
- Financial programming
For a good negotiation, it is essential to have a value to allocate to the entry, as this makes the whole process much easier. The company starts to have a greater interest in your proposal, as cash will already come into the purchase at the time of purchase. This leads to a reduction in the interest rate, as it increases the trust relationship and the installments are lighter according to the anticipated value.
Be patient: the moment you decide to buy is not necessarily the same week you will actually take the car out of the store or dealership. If there is no urgency to rely on the vehicle, choose to raise a good down payment before negotiating.
Input vs. installments: Another important factor is the total number of installments, which can be as much or even more important than a good input. For the finance company, it is very interesting to receive a considerable amount at the time of purchase, but it is very important to receive the full amount as soon as possible.
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Those who have a good value saved can still choose to use part for the down payment and the rest to complement higher installments, thus ending the financing faster. This tactic has another advantage: it is possible to leave this money yielding in other applications until the end of the financing.
In practice: Suppose a person wants to buy a R$50,000 car and has R$20,000 to down payment, but can only afford a loan of R$900 a month.
In Mobiauto’s financing simulator, with this entry, the remaining amount would be approved in 48 monthly installments between R$ 916 – R$ 1,013 , totaling R$ 63,968, considering the minimum amount, remembering that this same simulation can change according to your CPF.
Now let’s play with the budget a bit. Giving the same BRL 20 thousand down payment, but financing in 36 months, the monthly fee would be between BRL 1,103 – BRL 1,219 , totaling the amount of BRL 59,708.
That’s R$4,260 less interest or almost 10% of the car’s value , which is equivalent to almost five monthly payments of the first installment of R$900. That’s when it’s time to analyze whether it’s feasible to pay R$200 more per month to have this discount at the end of the loan.
- Take an online car finance simulation
Using an online car finance simulator gives the consumer a great advantage, since from home he can calmly do several calculations to know what best suits his financial life: a larger down payment, more installments or even if it’s worth it’s worth facing that amount of interest and that way you can study forms of payment.
Through the Mobiauto website, it is possible to make the online car financing simulation for prices . Anyone who already has a model in mind, just search for it on the Mobiauto car classifieds portal and, when you find the desired model, click on the ad to simulate the financing of that specific model. If the user finds the simulation interesting, he can notify the store in one click.
Since we are talking about the simulator, how about doing a simulation to get a better idea of how much the value can vary according to the payment method? Let’s put the value of BRL 50,000 and run four different simulations:
- No down payment and 48 monthly fees
Result: BRL 81,648 in 48 installments between BRL 1,701 and BRL 1,881
Interest: considering the minimum amount, the effective interest was R$31,648, which corresponds to more than half of the car’s value.
- 30% down payment and the remainder in 48 monthly installments
Result: BRL 66,840, with an inflow of BRL 15 thousand plus 48 installments between BRL 1,080 and BRL 1,194.
Interest: considering the minimum amount, the interest charged was R$ 16,840, that is, almost half of the interest charged in the simulation without an entry amount.
- 10% down payment and the remainder in 24 monthly installments
Result: BRL 59,648, with a down payment of BRL 5,000 plus 24 installments between BRL 2,277 and BRL 2,517
Interest: considering the minimum amount, the interest charged was R$9,648. It is interesting to note that even with a smaller input, the final value was more advantageous than the simulation above with 30% input. This shows that a smaller number of installments can generate less interest than a larger down payment.
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- 60% down payment and the remainder in 24 monthly installments
Result: BRL 53,790, down payment of BRL 30,000 plus 24 installments between BRL 990 and BRL 1,094
Interest: considering the minimum amount, the interest charged was R$3,790. Divided 24 times, they are equivalent to about R$ 154 per month.
Through a simple simulation, one can see the infinity of payment possibilities that can positively or negatively impact the budget, whether the choice is made carefully or not. In the simulations above, the difference between the smallest and the largest amount of interest was 735%.
- Research the interest rate at different financial institutions
The Mobiauto newsroom conducted a survey with seven dealerships in São Paulo, of different brands, to compare the average interest rate charged by each of them on brand new vehicles. What can even be a tiebreaker depending on the payment method?
It is very important to know that this percentage is just an average passed by the utility without considering the customer’s score, which means that it can vary according to the consumer’s CPF history. That’s why we suggest that if any of our readers have their dream car in one of these brands, they should pay a visit in person for a targeted simulation.
Another way to get a better rate is to contact your bank, as the rate can be much better. If the customer does not achieve such a high score, but has a good track record as a customer of that bank, such as receiving payment through them, always having the credit card up to date and not having outstanding debts, the interest rate may drop just by increased trust relationship between him and the financial institution.
Another point that we mentioned in the financing simulation topic is the input value and the number of installments, see the interest rate variation in each of the payment methods. Fiat gets to have a rate almost two-thirds lower for customers who give a down payment of 60% and pay the rest in 24 installments, compared to those who wish to buy without making a down payment.
Average interest rate without down payment and up to 48 times
New Chevrolet: 1.32%
Fiat Signal: 1.50%
Ford Caoa: 1.05%
Hyundai HMB MAX: 1.20%
Honda SP Japan: 1.20%
Interest rate with 30% down payment and up to 48 installments
New Chevrolet: 0.98%
Fiat Signal: 1.05%
Ford Caoa: 1.02%
Hyundai HMB MAX: 0.99%
Honda SP Japan: 0.99%
Interest rate with 60% down payment and in 24 installments
New Chevrolet: 0.89%
Fiat Signal: 0.59%
Hyundai HMB MAX: 0.59% or Zero rate for some specific vehicles
Honda SP Japan: 0.86%
Volkswagen: zero rate
- Fiat’s official bank is Itaú
*Hyundai’s official bank is Santander
- A good seller for a good deal
It’s no use insisting if the seller is not willing to serve, as he will not help you. Service is something very important, especially when it comes to a car, which represents a value that many took months and even years to gather.
Therefore, when you arrive at a store, your first requirement should be a salesperson ready to assist you from choosing to completion. This has nothing to do with sympathy, but what is being evaluated here is how the seller shows interest in your needs, patience with your questions and confidence in helping you get good financing.
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It makes it much easier, of course, when the consumer is honest about their car needs and also about payment. Make your limits clear and that you want the best within that amount. Negotiation is a game of persuasion and it is not just the part that sells, but also the part that buys: whoever knows how to play better ends up earning more. visit
- Attention in addition to monthly interest
Now it’s time to pay attention to the fine print, as they can be heavy in your pocket. Look for the acronym CET in your contract, which refers to the total cost of the operation and clarify each value with the seller, as you will have to dispose of this amount annually.
The CET encompasses all financing expenses, such as: interest, insurance, IOF (Financial Operation Tax) and even some services that can range from brokerage to electronic encumbrance.
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Clearly ask the seller where the total purchase price is, without even missing a fee, and check if the final price matches the negotiated interest rate.