Financing

I am old school and that will hopefully excuse the following .

Never buy what you cannot afford (afford = buy cash). Any other approach will cost you a bunch of more money. Whatever smart guys will try to argue in this respect. Calculate to the very very end and assume that the tax office will not accept fantastically constructed "tax saving models". And you will notice. And with respect to saved tax (if it works), you still get rid of the (additional) money, just others than the public services will have it .

 

I am new school and don't want to be like all the old guys who waited too long to buy a Ferrari with cash.

I financed mine with PenFed at like 2% interest rate. Got it paid off in 3 and 1/2 years on a 5 year note. So.. now I own it the same way those who paid cash do, same title.
I have a good job and I still manage to put money away for retirement despite the monthly car payment. If you can afford it then why not finance. As for the percentage, I can't give a solid number but I'd bet 40% of more used buyers do. New on a lease I'd wager 50% or greater. They love it, you pay them to drive it and at the end of the day they have a car worth 70% new price that the leasee has no equity in.

 

A pernicious cycle led by idiots. I read where the base price of cars has been going up and people are taking longer leases but they're owning the car longer so they buy a car with more options and a higher price tag. "I'm going to own it longer so I might as well buy more car.. and then spread it out just a few years longer"..

 

A few thoughts -

FFS in North America is VERY good and very competent when it comes to finance, leasing or other financial tools with Ferrari cars. Contrary to most banks, you can have an educated conversation about the actual cars and markets. (example - try and finance a 21 year old Honda, vs a 21 year old virgin 355).

You can absolutely and rightly debate if you should pay cash or "finance". To me, there are ethical, economic and practical elements to consider, particularly as these are expensive toys and luxuries.

You would be surprised at what (large) percentage of new and CPO Ferrari cars roll out of dealers using some form of financing. Given current interest rates, it's a reasonable idea that should be considered. Plus, leasing has advantages for some, etc etc.

FFS has a growing and dominant market share of Ferrari financing, and have some programs that are attractive IF you pursue that path. Some are unbeatable, some less so (eg. PenFed 2% is hard to beat, but that program has limits). They are absolutely the opposite of subprime, I'd imagine their default rate is ridiculously low.

Select is not financing as much as an Equity Line of Credit. Essentially, you are collateralizing your (valuable) Ferrari's and cars, similar mechanics to a home equity line. It's a very bespoke program and individualized, down to each transaction.

 

Couldn't read the article (behind a pay-wall) but it definitely seems like auto financing is the new housing sub-prime fiasco waiting to happen. You only need to have a pulse to get an auto loan right now. No job? No credit? No problem!!

Time to start investing in "Repo-man" companies.

 

When I saw the thread title I put the over/under at eight posts before someone gave the "only buy with cash" post, but BJJ blew that theory out of the water by giving it in response in post #2. I was worried over time Fchat may have gotten soft on the poor guys that have to finance to put a Ferrari in their garage, glad to see sentiment hasn't changed.

BTW, waiting until you can afford to buy with cash can be the worst strategy. Case in point, you want to buy a Testarossa/550/308/328 today with cash after you have saved for a few years. Now go back three or four years when you could have purchased the car on credit at typical selling prices back then. Exactly what interest rate could you have paid over that time frame for the car to cost you overall as much as paying cash now? 20% APR? 25% APR?

 

One year ago, having spent 2x what it cost for my 355 on another car in cash, my options would be save up again for a few years and buy cash or finance at current prices.

Really it would have never worked out as my saving would have not kept up with rising prices, so financing through penfed worked out nicely for me.

 

Financing or paying with cash is you and your families decision. You know your financial situation. No one else's opinion matters in the least.

In the least.

 

Every financial move involves some risk. I unloaded some stocks I felt were stagnating and used my 4% HELOC to cover the rest on my ferrari purchase. Didn't think I could get better than 4% on a 15 year old car.

But if I could have got a loan at 2% id do it in a heartbeat... That is a fantastic rate. But I also figure I can do enough research to do better than 2-4% in stocks too so financing isn't a bad thing if you have confidence in the risks you take with that cash elsewhere.

 

Yes, a lot of people are financed up past their ____. Depending on where you live, what sector of business you're in, etc. a lot of defining "worth" is by what you drive, size of house. Those people are kings of little to nothing down and are usually upside down on their cars and have a house with three rooms containing only a bean bag chair or futon. But I digress.

There are plenty of good financing options for cars for those with good credit. If you want to take advantage of them then great. Leases can also be a great option, especially for people who drive an average number of miles per year and like to change cars every two years or so. There are also a lot of good options for businesses to lease cars.

I paid cash for my car, but that's a personal thing with me. I have a job in the arts and I am not foolish enough to believe that I will remain this popular forever. So the only things I don't pay cash for is real estate, but I put a significant amount down and pay off within three years or so.

I don't think there's a right or wrong way to buy a Ferrari, unless you're in that first group of people I mentioned. Then you probably won't be able to afford the maintenance without running up yet another credit card.

 

I think different stokes for different people . a young person with a great steady job that wants a ferrari why not finance it.. now for an older person (like me) who already has to many cars cash is really the way to go...
for company trucks i always finance.. but i do not sign for them..
So if its right for you go for it..
also sometimes the Lease deal may not too bad like the special they had for FFs a couple of years ago no worry about depreciation or selling when you buy the next etc...but it has to be right .. Lets face no way to justify buying a new ferrari... no matter how you buy it

 

Great question! I enjoyed seeing the different POV here. Super_Dave, what method did you follow for our McLaren and Porsche and why?

in fairness I will disclose I've financed my last couple cars with PenFed at 1.74%..I figure my assets would do better elsewhere then flat and/or depreciating asset in my case.

 

Actually quite simple for me at least. A Ferrari (or other exotic) is pure luxury. I personally would never ever even think of purchasing a very expensive luxury article without having the money for it. I personally have further (luxury) desires, of course. But do not really mind if they do not come true for whatever reason (commen sense or lack of funds or both ).

Of course one can speculate with money given by a bank. It can work out or go bad. Any extrapolation of current developments will be worthless if some unpredictable events turn markets (remember 9/11?).

Young guy and steady job? What is a steady job nowadays, is there something like that still existent?

And, even if everything looks fine for someone, what is the steady job worth, if a blood vessel blows in your brain, suddenly? And all kinds of luxury has been financed? Wife at home and two kids? No! I am definitely not the "no risk no fun" type. And nevertheless do not feel having missed things in life. In the contrary . In particular I was at any time able to be happy without a Ferrari and this is still true today (I would miss the cars, but not become unhappy)! And: if one has a dream, part of the fascination is that you have to stretch (= save money) for it, really hard and sometimes for years or even decades ....

P.S.: I am one of those "poor" guys, who had to work, earn and save money for luxury items.

P.P.S.: re happiness: a few years ago I purchased a Sommerkamp FR100 for 5.-- (truly!) at a jumble, great optical condition, but "dunno" function. At home I repaced a few elcos and then it worked perfectly. A (forgotten) dream of my youth had become true, I now have a Sommerkamp FR100 . Bought that cash too

 

Cash vs Finance argument is weak, when you consider the historically low rates we can take advantage of right now. Probably a good compromise is to put down at least 50% of the value and then finance the rest at a very low rate. Use the cash you saved towards some money-making endeavor or savings, as well as potential maintenance issues that may arise with the car.

If something happens, you probably won't be underwater on the car and can sell to get your money back (or more likely get much more back, with the way the markets been lately).

 

Fairly simple for me. I make sure I have the cash on-hand to pay for the car but always finance if I can get a rate that is lower than the rate of inflation. I was actually able to beat Penfed's rate by using Alliant Credit Union.

If your finance rate is lower that the rate of inflation then your are paying off your loan over time with a unit of currency that is getting weaker/devalued more rapidly than you are being charged to use the money.

If I know I'm going to keep the car for a long time (in this type of scenario) I will go out 60 or 72 months, when at the end of the loan, the value of the dollar has dropped significantly. Obviously if your loan rate equals inflation then you are just using the bank's money for free.

Like others have mentioned in this thread, I strongly believe that you must have the ability to invest and to increase your net worth while making the finance payments. I do not think it is wise to dedicate a significant percentage of your disposable income to a car payment.

Just my 2 cents.

 

With loan interest rates of 2% (or lower), why not take advantage of someone else's money, while your money grows (hopefully) at a better rate?

If I can make (conservatively) 5% on my investments, why not borrow at 2%? That puts me at 3% positive.

I'm a firm believer in being very careful with debt load. When young, most of us have to take on some debt load, particularly if pursing the dream of home-ownership. However, with time, we should be working to lower that load, while putting money away for retirement. That might require some delayed gratification, but as most of us "senior" guys know, time goes by very swiftly. So the delay isn't all that long, especially when seen looking back.

Sid

 

This question is asked on every forum and the answers are always the same.

1. Pay cash for toys group

2. With rates so low ... I financed my car and put my money into higher interest bearing investments group.

or

3. I lease because I can right it off in my business and then purchase the car privately for the agreed upon residual group.

 

I dont have kids, and I'm an only child, and my Wife has a great family that will take care of her if i pop... or when i do... so I want to leverage to the hilt, and buy that 488!

I made FOA an offer of $2000 down and $500 a month for as long as it takes but they said no? .... so clearly I need to save.