A Lot of Car Buying by Lot

In Brazil's inflation-ridden economy, getting a new car financed usually means making a 50% down payment and pay ing a whopping 3 1/2% monthly interest on the balance over the next 18 months. Nonetheless, Brazil makes a substantial number of its own vehicles, and sells its tax-heavy trucks and cars (price of a new Volkswagen: $2,693) at a rate of 18,000 a month. Part of the explanation is an ingenious lottery called the consorcio, which gives Brazilians a gambler's chance to acquire a new car far sooner than they otherwise could--unless, of course, they happen to have enough ready cash to buy one outright.

Spinning the Basket. The way a typical consorcio works: 80 or so would-be buyers get together, pool enough money each month to buy two cars. The group gathers at an auto showroom, where some lucky member gets one of the cars by the spin of a bingo-style basket. For him, the effect is much the same as if he had made an installment plan purchase: he takes possession of the car right away, goes on making payments into the consorcio each month thereafter.

The second car is then auctioned off to another consorciado, with the proceeds from his highest cash bid going into the group pool. He, too, continues making the regular monthly payments, except that these are reduced slightly to make up for the additional cash that he has had to pay out in the auction.

The remaining partners always have the next lottery and auction to look forward to, with the procedure continuing month after month until every one of them gets a car. The most remarkable thing is that even the last consorciado, unlucky as he has been, will probably wind up with a car sooner than if he had merely put aside the same amount of money every month on his own. Reason: the extra cash accumulated in each auction, coming on top of the members' regular monthly payments, enables the consorcio to buy--and distribute by lottery--a third, or maybe even a fourth new car every couple of months.

Safe & Lucky. In short, the consorcio is a kind of collective buy-now, pay-later plan by which credit-wary Brazilians can be sure of getting a car--though they can never know exactly how soon--without making huge down payments or interest charges. Actually, the technique was devised in the early 1950s by enterprising tailors who had been having trouble selling clothes. Before long, freelance car-buying consorcios sprang up, but these were often marked by fraud.

Today, auto dealers themselves are sponsoring consorcios, and even manufacturers are getting into the act. Months ago, Max Pearce, General Managing Director of Willys-Overland do Brazil, began to notice the spectacular successes some local dealers were having with consorcios, wondered if the scheme might not be worth trying on a nationwide basis. Last month the company kicked off a consorcio campaign expected to generate communal purchases of 2,500 cars a month by 1969. Skeptical at first, Joao Lopes Coelho, director of a dealer-run lottery operation in Rio de Janeiro, lauds the whole idea as "typical of Brazilian ingenuity and flair for gambling, something that is both safe and lucky."

This file is automatically generated by a robot program, so reader's discretion is required.