Discover the 3 types of car financing and choose the best one for you
There are different types of vehicle financing. Each modality has very different characteristics and conditions, which make them more or less suitable according to its profile and objectives. Car Loan
With that in mind, we decided to prepare this article and we will explain each one of them in detail. Thus, it is easier to understand which option best fits your possibilities. Read on and learn more about it right now!
The 3 Most Common Types of Car Financing
Basically there are 3 types of car finance that are the most used in the market. In the following topics, we explain in detail how each works. Check it out!
Direct Consumer Credit
Direct Consumer Credit (CDC) is an excellent financing option for those who want to purchase a car, in addition to being one of the most common and best known in the market.
In this case, the buyer interested in buying the good requests a loan (or financing) to a bank or a financial institution, which grants credit equivalent to the value of the car.
In this case, in general, a down payment is offered and the remainder is divided into equal installments, plus an interest rate. While the financing lasts, the car is guaranteed that the loan will be repaid. This is known in the market as alienation to the institution.
In other words, you will have ownership of the car, but it is not actually yours until the mortgage is fully paid off. This means that you will not be able to make any kind of negotiation with the vehicle until your debt is paid off — so, no idea, agreed?
In addition, it is important to mention that, while the contract is active and the amount of the loan is not paid, the car remains as a guarantee, sold to the institution. This guarantee is also known as encumbrance .
Direct negotiation with the institution
To negotiate your financing, it is not necessary to rely on the intervention of the dealership responsible for selling the car. It is worth reinforcing the possibility of trying more favorable interest rates with the institution, making credit even more attractive.
Remembering that if installment payments are not made as agreed, it is possible that the credit institution may file a lawsuit to take your car .
It is also possible to finance a car through leasing, a process quite different from CDC. Here, you pay a monthly rent for a specified period to the company responsible for this type of operation and the vehicle is in their name during this process.
When all payments have been completed, ownership of the car is transferred to your name, without incurring any charges other than what has already been paid overtime.
In this case, as with CDC, you can negotiate directly with a company specialized in leasing, without the need for intermediation by a dealership. Interest rates are also fixed and are defined at the time of signing the contract.
In the market, this type of financing is also called leasing . If you fail to pay the installments, the company can take the car back in a much more practical way, without having to go through all the bureaucracy of a lawsuit.
In a consortium, a group of people interested in acquiring a good pay monthly amounts to a company, the trustee of the consortium. Every month, she conducts sweepstakes that aim to contemplate a customer and provide a letter of credit.
It is also one of the well-known vehicle financing types on the market, just like the CDC. It does not charge interest rates, which makes it a very attractive option at first glance.
However, you must keep an eye on the fees charged by the administrator and the adjustment that is made in installments from time to time – which guarantees that your purchasing power will be maintained if you only receive the contemplation at the end of the contract.
This is a point that needs attention. In the other two types of financing, the amount of the installments is fixed, based on a predefined interest rate. Here, there may be variations throughout the contract , as the adjustment is made based on the value of the car registered in the Fipe table.
By the way, it’s a good option only if you’re not in a hurry to have your car in the garage. Unless you have some money saved to bid on the sweepstakes (and manage to get the letter of credit), you may have your number awarded in both the first and last installments.
In practice, if the duration of the contract is 36 months, the possibility of purchasing the vehicle only after 3 years should be considered. Even if you receive the corrected value, ensuring that it is enough to buy a car with the desired characteristics, the waiting time is something that needs to be put on the scale.
How to identify the most suitable type of financing for you
With various types of financing available on the market, how can you guarantee the best choice? First of all, you need to assess which ones are according to your financial possibilities . So, the first point is to find a portion that fits your budget.
Don’t forget that, in addition to paying monthly installments, you will have other costs, such as car insurance , taxes, fuel and preventive maintenance.
Also, the rush to get the car and use it is another point that weighs heavily. If you want to make the purchase to work as an application driver , for example, you need to close the contract already with the possibility of taking the vehicle home. In this case, the consortium is not the most suitable option.
Put all the points on the scale, weigh the pros and cons of each modality and see which one can be more beneficial for your pocket and for your goals. Visit
Now that you know better the main types of car financing available in the market, it’s easier to make a better decision, don’t you think? Understanding your options is the best way to act rationally and avoid problems that could compromise your finances. Count on a specialized partner to help you make the best choi