Should I buy a car with smart or conventional credit? – Car LoansOn March 20, 2020 by admin
It depends on what type of vehicle user you are. Smart automotive credit is a type of financing designed for a consumer who decides to change his vehicle relatively frequently, for example every two or three years.
We are in a time of vehicle replacement, so when choosing an auto loan you have to know that there are two alternatives in the market: one is the smart car loan and the other is the conventional car loan . Let’s review its main characteristics so you can know what type of user you are and so choose better according to what you need.
Smart Automotive Credit
Designed for a consumer who changes his vehicle with relative frequency and who meets some points:
.- To access a smart automotive credit you must have 20% of the value of the vehicle as the minimum initial foot .
.- The terms of the intelligent automotive credit are 24 or 36 months .
.- The vehicle you buy remains in pledge .
.- Once the term of the intelligent automotive credit has ended, you can choose to keep the car, return it or access a new one . Each of these options under their respective conditions that we will explain later.
How does smart auto credit work?
Unlike conventional automotive credit, smart car purchases divide the amount to be financed as follows:
Smart car buying allows you to pay in installments between 30% and 40% of the vehicle within 24 or 36 months , whichever you prefer. During this period, the fee to be paid includes interest rates and operating expenses corresponding to the total value financed.
Once the term of the intelligent automotive credit is met, you have a balance of 40% or 50% of the value of the vehicle (VFMG) , which you can choose from three alternatives to pay:
Alternative 1 | Renew vehicle
Smart car shopping is designed for those who like to change cars frequently. So the first alternative you have is to renew your vehicle by accessing a new credit .
In this case the automaker rates the car to receive it as part of payment of the balance you have. If the appraisal of the car is greater than the value of the debt, you will have money in your favor to use as a foot for your new car.
The great advantage is to take advantage of a car during its best years, which are the first years, and then opt again for 0 km with comfortable odds. It is important that you assess that at some point you will have to close the cycle and decide between keeping the vehicle, delivering it or selling it, which we explain below.
Alternative 2 | Keep the car
By financing a vehicle with Smart Automotive Credit, you also have the option of keeping it, after having paid all the installments. To do this, you have to pay a fee that is equal to 50% or 40% of the total value of the car when it was new. This value is informed at the time of the sale, it is called VFMG (Minimum Guaranteed Future Value) and corresponds to the value that your car will have in two or three years, depending on the term of the credit.
You can refinance the fee, pay with your own resources or request a loan from another financial institution. The disadvantage of this alternative is that by adding the initial foot – what is paid on the credit and the fee – the total cost you pay for the car will be much higher than if you bought it with a conventional credit.
Unless you have the possibility to sell it at a much better price than the one paid by the automaker, this alternative is not very convenient for your pocket.
Alternative 3 | Return the car
If at the end of the payment of your smart automotive credit you do not want to keep the car, or acquire a new one, you have the option of returning the vehicle.
For this transaction the automaker rates your car to receive it as part of payment and pay off your credit. In the same way as in Alternative 1, in case the VFMG is less than the appraisal of the car, you will have a balance in your favor that will be returned to you.
It is important to keep in mind the conditions that govern in the contract of the intelligent automotive credit so that the return of the vehicle is valid. Mainly check the mileage and the installation of accessories to be sure when doing the process.
Conventional automotive credit
Some of its characteristics are:
.- It is a type of financing designed for a consumer who gives preference to full payment to have the car in his name.
.- The monthly payments stipulated for the extinction of the debt are the same in all periods.
.- In general, entities that grant a conventional automobile credit require a minimum foot for this type of financing.
.- The credit term can range from 6 to 60 months.
Determining which of the two types of credit is the best for you, depends largely on your current financial status and how you project it during the time you are going to pay the financing, in addition to evaluating the Total Cost of Credit (CTC) that you are going to hire.
To intelligently contract the credit for a new car or if you have plans to renew the one you currently have, Compara has the technology to quote and compare different options of Automotive Credit and find the most convenient for you. Enter our comparator and evaluate the different options.