It has been a while since the car has gone from being a status item to becoming a necessary everyday thing. Due to the routines and habits of new lifestyles, the car has become essential for commuting to work, schools, travel and daily activities. As a result, many seek financial alternatives to be able to acquire this essential good. If you are looking for it, you come across different payment options and you have a question: What are the differences between leasing and CDC financing?
Few can and do have the willingness to buy a car in sight, either because they are short-term in value or end up weighing on financial resources. This is the installation of the vehicle as an excellent alternative for those who need a new, semi-new or used car. The most common modality in Brazil is CDC (Direct Consumer Credit) financing. However, another possibility of repaying the term is leasing. Unusual among individuals, this operation is already widely used by companies and popular in the United States.
What will be the most viable option for your pocket?
If you want the answer to this question and understand once and for all the differences between leasing and CDC financing, keep reading this text!
In order to understand the differences between leasing and CDC financing, we have decided to explain in detail how each of these forms of payment works. The so-called leasing is a kind of car rental. In it the buyer will own the property, but it will only be transferred to his name at the end of the settlement of the installments. Leasing is a contract denominated in Brazilian law as leasing and is not, therefore, a financing operation. The parties involved are called the “lessor”, in this case the banks, and “lessee” being here the future owner of the vehicle.
In practice, many have considered this form of payment more advantageous because it has, in many cases, lower interest rates, mainly because they do not include the amount of the IOF – Tax on Financial Transactions. However, it is important to analyze all the characteristics and offer of each bank, and may vary and contain some bureaucracies.
Among the main points of the lease is that there are no contracts with terms less than 24 months and can only be settled in advance, if there is interest, after three months or have paid 30% of the value of the car. However, in all cases, when the lesser opts for early discharge, there is a contract termination penalty that usually ranges from 3% to 5%. In addition, for discharge between three and 24 months, a third party must be appointed to transfer ownership. That is, the car will not be in the name of the lessee. Only after the 24th month following the commencement of the lease can the vehicle be transferred to the lessee’s name.
The time has come to understand a little more about the differences between leasing and CDC financing, knowing all the details about this second form of payment. The CDC basically consists of the buyer making a kind of loan in a bank, with a certain amount of interest that varies according to the amount of installments to be paid. Unlike leasing, at CDC the car will be in the name of the buyer, but sold to the financial institution that financed it. This way, this vehicle is collateralised in a possible debt. The CDC has higher interest, when compared to leasing, because it includes the IOF.However, the biggest advantage of this type of payment is the possibility that the buyer can repay all or part of the debt at any time, with the possibility of reducing the interest that would be charged in future in installments. In addition,
Differences between leasing and CDC financing
It lies mainly in the issues of interest and rigidity when paying installments. While leasing has a lower interest rate and may ultimately yield big savings, in CDC you are not tied to deadlines, allowing you to pay off your debt, or part of it, whenever you want, making it possible to lower future values. In the latter case, you have more freedom if some extra money comes up and you want to get rid of the installments.
In addition, another point to note about the differences between leasing and CDC financing is vehicle ownership. While in the first, the vehicle stays in the bank’s name until the end of the payment, in the second, the car is already going to the buyer’s name from the beginning. In both cases there is a risk of the car being taken over by the bank in case of debt.
When choosing leasing or CDC
The consumer should keep in mind his intentions with the vehicle and his long-term financial situation. Do you intend to buy a car and spend a lot of time with it? So maybe leasing is a good option. Do you intend to buy provisionally until you can get extra money and buy a better vehicle? So think carefully about CDC financing. Is your income unstable, having times when extra earnings come in and it gives a breather in your finances? So take a good look at whether it is better to invest the money coming in and keep it from leasing, or if you prefer to pay off more installments at one time over CDC financing.
We hope we have helped you understand the differences between leasing and CDC financing. If you are thinking of buying a new car but still have questions about what is the best deal for you, contact one of our retailers!