Three ways to finance a car in Peru
There are three main ways to finance a car in Peru, depending on your current situation and future plans. They involve getting a bank loan, signing a leasing contract, or joining a collective fund, also known as a consortium.
The first and most commonly known method is acquiring a personal loan or, better yet, a vehicle loan where the car itself is collateral. When buying a brand new vehicle, the latter is usually the best way as it will end up being cheaper.
To give you better idea, buying a $20,000 car with $4,000 down and 36 months to pay off the remaining $16,000 would require monthly payments of around $560, or nearly $600 per month with automobile insurance depending on the financial institution. Buying separate insurance would cost $150-$1,000 depending on coverage.
Peru's benchmark interest rate on October 16, 2017 was 3.75%.
Named after a model more commonly used in the United States, this type of financing is less used in Peru, especially for private party buyers. It, however, is becoming more popular for those who want the flexibility of either buying a car or just using it for a few years.
In general, the car is bought by the bank (lessor) but the client (lessee) obtains vehicle usage rights by making monthly payments.
After the lease period (e.g. three years) is over, the lessee has three options. He or she can return the car in exchange for a new one, return it outright, or buy the car at the residual price.
The residual price is the original value of the car (including interest and expenses associated with the use of the car) minus all the payments made by the lessee.
This type of automobile purchasing method is for buyers who do not necessarily need a car right away. In Peru, some of the well known fund managers are Pandero, Maquisistema and Promoter Opción.
With this type of financing, the buyer must first register with the collective fund and start making monthly payments before qualifying to obtain a certificate of purchase.
Monthly installments depend on the type of car you want as well as the fee charged by the company managing the collective fund. Keep in mind that vehicle insurance is usually not included.
To better understand, this system is a cross between a monthly lottery and an auction. Whenever the managing fund draws your name, you acquire your car.
Therefore, if you are one of the first names to be drawn over the lottery period (e.g. three years), you get your car earlier than others and financing ends up being much less than a bank loan.
As for why it is similar to an auction, buyers can reduce their monthly payments, shorten their loan period, or increase their chances in winning a lottery draw by simply injecting more money into their account.
So, for all you eager buyers, map out a short to mid-term plan and remember to consider all three options before making your automobile financing decision. In the end, it could save you a pretty penny, or even more.