MercoPress. South Atlantic News Agency

Higher rates expected to dent into Brazil’s booming auto sales

Brazil ranked among the top six auto manufacturers in 2009

Interest rates on financing car sales without a down payment have almost doubled in Brazil following last week’s liquidity tightening measures from the central bank, reports O Estado de Sao Paulo, adding that higher financial costs could dent automobile sales by as much as 20%.

According to the Sao Paulo daily, the main banks were reluctant to supply details of the new financing plans that became effective Monday and the national association of car manufacturers, Anef only revealed that last September 46% of car sales were financed by the Consumers’ Direct Credit, CDC, plan, one of the several stimuli measures from the Brazilian government.

Pesquisas MSantos, a pollster which specializes in the car industry said that a sample of 40 outlets in Sao Paulo showed that the financial cost of car sales without a down payment as of Monday ranged between 1.6% and 2.5% per month when only last week they stood at 1.3% and 1.4%.

Economist Ayrton Fontes from Pesaquisas MSantos estimates that with the higher rates the buyer of a Celta 1.0 on a 60 month financing plan and no down payment will now have a monthly instalment of 762 Real when last week it was 610 Real. This in money terms means that at the end of the five years the consumer will have paid an additional 9.120 Real for the car because of the higher rates.

The latest measures also will impact on the Brazilian lower income buyers that were the last to come into the flourishing auto market.

However rates for financing with down payments remained virtually unchanged. But the down payment for a 36 month financing is now 20% of the car’s value, 30% for 48 months and 40% for 60 months. For 24 months purchases there is no need of down payment and rates are the same.