leasing a ferrari

That is nice to know. One of the main reasons to lease is not tying up capital which can be better deployed elsewhere. That's why when it comes to leasing, my preference is to put down as little as possible.

 

Far more write off potential in a lease...if one is so inclined. This is especially true for a car you are only keeping for 2-3 years.

 

I used to feel the same way. You feel like your 'azz' is in the wind. I switched from Allstate to private insurance last year so my guy shops every potential insurer. My rates dropped, I picked up a nice umbrella policy and my insurance improved markedly...all for less than what I was paying Allstate. He 'joked' that I should run the car into a wall when I was done with it and insurance would send me a check for the purchase price...hmm ;0)

 

+1,000,000. I had been there before.

 

So doing your math in my head you discuss Opportunity loss.

$300k leased Ferrari per your statement above. Say you only put $45k down.

Now you pay sales tax about another $4k on the down payment.

You now say 24 payments for 2 years at $4000 as someone else pointed out. I truly have no clue what a payment would be. Just a guess.

So now you've got $49k plus the $96k totaling $145000 out of pocket to keep $250000 in another investment.

Where are you making that 55% return on your money is my question ?


Wouldn't it be smarter to write the check for $330k including sales tax and lose the $80k over the course of 2 years in depreciation? Seems to me you are $70,000 ahead on 2 years.

Please correct me if I'm wrong in my math.


I still believe people lease because they can't really afford.

What Job in this world would not a red flag fly to the IRS when you try to write off a $300k car payment? I'm shocked any accountant would advise this way ever. To have a company car it needs to be used as a company car. I guess I don't know who needs a Ferrari to sell goods to clients other than a Detailing shop or car pimper of some kind.

 

I just went through the lease process on a California and now a 458.

1. You have to understand the difference between an open and closed lease. Most, if not all leasing companies (Putnam, Premiere, and Ferrari) do open leases for any Ferrari and other exotics. This means that you are responsible for the market value of the car the same as if you financed it. The term is usually 60 months on all of the above programs, but you can get out of the lease at any point by trading or selling and paying off the remaining balance. Premiere and Putnam will send you an amortized payoff schedule so that you can see exactly what that amount will be at any point in the lease.

The downside here is if you get into an accident... or if the Ferrari market should take a dive... then you potentially have a car that you owe more than what you can trade or sell it for. If you trade the car in and the dealer doesn't give you want you need to match the payoff you could have some backend difference to make up when you turn in the car. If you do happen to keep the car until the end, then you'll just pay the residual amount.

With a closed lease, you just can hold on for the entire term (2,3,4 years) and then turn in the keys. As long as there are no excessive wear and mileage charges. This is how Porsche, BMW, Mercedes, Maserati, and all other car leases work.

2. There is a 3500/yr mileage restriction through the Ferrari program, but you'll never hold the car for 5 years so there's no problem. Only if you really rack up the miles and then you could be reducing the market value of the car.

3. You should always just do the minimum drive-off on any lease. My 2014 California was $8.8K and my 2012 458 was $10.4K. The drive-off is first month, security deposit (which you get back), title and other charges. Sales tax laws depend on the state, but here in CA its a huge advantage because you only pay tax on your use of the car with a lease - so I pay about $275 a month rather than $22.5K down at the time of purchase.

4. The interest rates are worse on a lease than financing. Ferrari money factor is .0025 on new (6%) and .0027 on used. There are some special programs on certain models that could reduce that slightly. Multiply the money factor by 2400 to get the interest rate.

5. There is a buyout charge on all of these open leases. Putnam and Premiere charge 1-2 payments. Ferrari is about 1/2 of a payment. So when you look at that payoff schedule consider that amount will be slightly higher depending on the company

6. Leasing makes sense if you're writing off through your own corporation. If you have your corp setup properly it doesn't matter what car it is. Just percentage of usage for business and you have to have enough revenue to justify the expense. With a lease you can immediately write-off all of the amount that you're claiming for business use. You can't do this with a purchased car where you need to amortize the expense... and there are a lot of restrictions around the amounts.

Leasing might also make sense if you're turning the cars over quickly and don't want to tie up your cash.

7. I looked at Putnam, Premiere and Ferrari. All were good companies and very transparent, but Ferrari had the better deal for me... but all were very close.


Hope this helps...

 

For the last 10 years...mine :0)

 

Not about affording. I'd rather buy a house and rent it out than put that much cash into a car. Relative cost will be higher but i prefer to do it this way. I've bought cars for cash before and becasue i like to change them every couple of years i do a lease purchase. If i was going to keep the car forever then its probably best to just buy it for cash

 

So what are payments on leases like these?

 

One very simple "sanity check" -

define a specific term you will own the car (eg. 24 months),

compare the cost of leasing (i.e. financing charges, interest, monthly tax) vs. the amount of sales tax you would otherwise pay at purchase; for me that is the litmus test

factor in additional tax savings (i.e. IRS deductions) if they apply

factor in any capital appreciation (be realistic, seriously) on the money you would have spent on the car

At that point, you can make an informed decision.

"value" such as knowing you don't have a pile of cash stuck in a semi-illiquid asset, or having "walk-away" protection, to me are irrelevant

single best thing when structuring a lease is to negotiate the money factor down, it's really the only variable, much like in financing

 

So you buy a cheap house for $250k instead. Rent it for barely the payment. In this market you most likely get zero gain in value.


I'd love to see this math vs the huge chunk spent. In my example $150k lost on a $300k car

That example does nothing. In 20 years you'll have a $275k house most likely. Rent factors these days with too many renting won't pay that house down faster than 20 plus years.

If you continually lose $50k a year minimum on these cars it only takes 5 years to blow that first $250k not put into a car.

I'm sorry I see zero upside on this example of yours.

 

Excellent you've flown under the radar. A $300k 2 door sports car is not a business car was my example.

If done correctly you only get the "business use" write off.

So if you are telling the accountant 100% of your use is business that's laughable unless you are in the high end car pimping business. Nothing is justified this way.

Income level has nothing to do with it. Even at $100 million a year.

Again I ask what job is using a 500hp 2 seat sports car as a company vehicle?

 

One thing to point out, Ferrari, like most manufacturers, are starting to offer closed end leases. They started with the FF with a great program that includes residuals that are much higher than what the market value will be at the end of the lease. This is a subsidized lease. Of course, the FF is a tough seller but will be interesting to see if they expand the closed end program when other cars are longer in their model cycle. Calis aren't flying off the shelf now given the upcoming new model and, don't shoot me, there will be a time when 458's will slow down.

 

What about doing a home eq., or 1st on your house? I see rates on those at 3-4 percent. The interest is 100 tax deductible, and the300,000, you were going to spend to buy the 458, invest it into profitable ventures.

 

Very helpful...thanks. I tend to switch vehicles too often, and your lease examples may be a better option for me, depending on the monthly payment schedule. I have only purchased f cars to date. How easy it is to get out of the lease would be my biggest worry. Mileage isn't an issue, as I drive my exotics sparingly.

This isn't about what we can afford or not. It's about what costs us the least amount of money for our buying and driving habits.

 

Very good points.

I'd add a corollary to the last couple of points.

6. In the lease you're not having to pay all of the sales tax up front. Makes sense if you rotate through a lot of cars frequently.

7. Manhattan Leasing company is another open ended company. I have worked with all 3 and prefer Premier. For me they seemed to be the most transparent with their numbers. Also my CPA liked their amortization the best (interest not as front loaded as the others).




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To get out of the lease you either sell the car or trade it through a dealer.


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A Ferrari helps sell clients?
Won't most think you make way too much at your job and source another firm?

I know it depends on what you are marketing.


It's funny how no one so far admits to how much these leases cost.

An open it seems has you on the line for massive depreciation. That's not a lease it's really just a loan you don't pay all the sales tax on.

If the car market dives you get stuck with the payment and a car no one wants.

I still think everyone stating "I get better return elsewhere" is using smoke and mirrors on themselves to justify a car purchase.

The numbers don't prove it prudent.

Buying exotics is exactly what it is. Expensive to own with no ROI elsewhere that can get close to offsetting the costs.

I'd prefer people just say I can afford the payment so I don't care about the $3-6k a month lost on them.

 

My dear sir. I never said I write off any vehicle at the 100% level. I write each vehicle off at the percentage it is used for work.

I'm not sure what you don't understand regarding leasing vs cash purchase. But I'll try again. If you lease a car for one year for say 100k. The money factor is say 6%. You write the car off at say the 50% level or roughly 1/3 savings of 1/2 of your payment. The write off more than covers the interest and you are not tying up every penny of your 100k. I should hope you earn more than 6% on your capital gains...

 

Some find it indelicate to discuss such matters on a public forum. You obviously have an internet connection. Reach out to Premier Financial and have them model a lease for you.

Best

Doc J