What % of one's LIQUID assets should be used to purchase a Ferrari?

That was truly awesome....especially the part about your pets. I could see my Golden Retriever actually doing that! LOL!

 

Perhaps that amount is as significant as a nice suit or a big vacation?
Would you finance either? A nice humidor full of Cubans and a couple cases of scotch?

Sweating the loss of 12-15% of 300k should be irrelevant. Sweating the loss of interest on 30k means you can't afford the car in the first place.

Leasing is not deductable like it used to be, and financing conventionally is silly. If you're making 12-15%+, why pay 7%/prime on money you have when writing a check makes it zero %, or drops cost to 5-8%, same as financing but deal is done. And a damn sight cheaper than leasing.

If the 12-15% is more important than the fun you'll have, don't buy it. If it appreciates, it should do better than 10% if it is a 430 or Enzo. If not, fun isn't cheap. How much fun you want to have?

My 2M lira

PS: Desmo, financing toys is a matter of scale. Financing a 30-80k toy is OK, as long as you are able to get out of it. But a big stretch for same is dangerous if you aren't in a stable income environment.
Even Gulfstreams and Heli's get financed. Just to holding cos. who minimize risk to the users. Warren didn't buy Netjets(IIRC, I think it was them) for nothing.

 

My rule of thumb.....if you have to ask how much.....you cant afford it.

Walk away.

Do you ask how much a bag of chips are at a store ? NO

Do you ask the gas companies how much gas will be next week ? NO

Do you ask how much a bottle of wine is at a high end resturant ? NO


Everyone pretty much knows how much an Fcar will cost, just like a nice home in a nice part of town. No use asking.....the price is not gonna be lower tomorrow.

You need to pay to play......in anything you do.

 

I hope the inverse of your rule isn't that if you don't ask, you can afford it...

 

Tell me where I can put my money where it will make 12-15% over the long term risk free and I will get loans on my Ferraris tomorrow. Until someone can answer this for me, I'll pay cash. Financing or leasing costs at least 8%. You have to make 13% before taxes to equal that with no risk.

As to the original question, if you have 10 million net worth, spending 5 million on cars is not likely to jeopardise your financial security. On the other hand, if you have 100K or less, you shouldn't be buying toys that cost 30K and up not to much upkeep.

Dave

 

yes they will. If you wait for a lot of tomorrows, the price will be a lot different

 

If you die with $2 million in the bank, or $2 million in debt, you are just as dead. However, in one case you had $4 million more fun !

 

$4M worth of fun?

Where is the philanthropic sage wisdom in this answer?



On another note: I think the guy is asking a "qualifying" question as a guage for input into his decision making. Sure he has to make the final decision but he's not asking how much should I spend/net worth, he is asking how much have others leveraged against their liquid estate.

 

shark06 - my two cents - whether your driving a BMW, Cadillac or Ferrari you should have a pretty good idea what kind of car payment you can handle against you cash flow. I wouldn't pump $50k-$150k into a Ferrari irrespective of the model if you aren't swimming in seven figures, liquid or otherwise.

 

I don't think I would have bought if I couldn't have paid cash, that's just the way I was brought up...if you don't have the cash you can't afford it...save some more, the only thing you borrow money for is a house and then pay it off as quick as you can. Thanks Dad and Granddad for the advice...it works.

 

First of all, NO ONE is making 12 to 15% on their money year after year. It doesn't happen. Anyone that tells you different is a LIAR. Even Warren Buffett doesn't.

That said, I'm not comfortable plunking down $50-$100K of cash and tying down to a car. And a TOY CAR at that. Keep your cash, finance your toys. If you get tired of your toys, sell them and add more to your cash. Cash is king. Keep it.

 

I bet you he would if he was only managing a few million.

 

Sorry, but that's about the most lame rule I've heard in a while. I know plenty of people that are "too good" to ask "how much". And they're broke because of it.

I know a guy personally that earns over $500K per year and has for years, but just filed personal bankruptcy. All because he never bothered to ask "how much?"

 

Ha. Yeah, that makes sense. The LESS money you have, the MORE you make!

 

On a percentage basis, yes.

Why do you think they close some mutual funds to new investment? If they grow too large, it becomes extremely difficult for them to invest all the money successfully, and they become a closet index fund.

 

The problem with most Ferraris, excluding brand new ones, is that it's not how much it costs to buy it, but how much it costs to maintain it.

With any Ferrari (from a $15k 308GT4 to a $10MM 250GTO), if you can't handle an unexpected $10k repair bill you shouldn't own the car.

 

My formula is:

((Total net worth)X.10-(value of existing cars and other toys)) / (2X(the displacement of a single cylinder of the Ferrari I'm interested in))

This is why the only Ferrari's I have are 1:43 scale.

 

Just go ahead and buy the car you want to own, buy with your heart and you head will find a way to justify the purchase.

 

Are you 20 or are 60? What's you income? (Please don't answer, this is to mamke a point)

if you are 30, with 1M liquid and an annual income of 600K the advice will be different than if you are 65 with 1M liquid and an annual retirement income of 45K

It's not all about liquidity!!!

I hope all can see that in the example above both have $1M liquid, but obviously the 30 y/o is better suited financially to F-Car ownership IMO.

Bottom line, no one can answer your question with any validity without knowing more parameter's than "liquid" $$$.

 

Good advice. If 10k PER YEAR on maintenance doesn't bother you, go for it. You CAN do it cheaper, by turning your own wrenches, etc, and it may cost less regardless, but IMO as a very conservative type, you should be happy to eat 10k/yr in maintenance before a Ferrari looks like a good idea.

I say that because I think Ferraris deserve to be "maintained regardless of cost." I just hate to see them neglected by people who scrape up the inital price but can't afford to maintain them.

 

Sorry, I have to play these on you!
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If the exotic car is your only indulgence I would say maybe 20% of the liquid assets is okay. This way you have plenty of money for maintenance and repairs without really getting too close to the edge.
BT

 

it's been said before on this thread, but i'll chime in anyway...don't wait, buy it sooner rather than later. you don't get the time back you spend thinking about owning it. just buy it, take some risk if you have to, and spend that time driving, staring, waxing, enjoying--whatever.

john

 

This is a good question. My personal policy is no more than 10% of my liquidity is to be tied up with toys/ luxury goods. Real Estate, even vacation homes, does not count in this as RE tends to appreciate in the long term regardless of where we sit in the market (I'm more of a buy and hold kind of guy with my personal portfolio/ possessions). But how do you define liquidity? For me, it is cash and anything I can sell immediately without a penalty. Stocks, Bonds, etc. It sounds like 10% isn't way off base.

As far as financing goes, my father always taught me that you never finance anything that depreciates, unless you can write off the interest. If I really wanted a Ferrari, but couldn't afford paying cash, I wouldn't buy one. Even if you are making 15% on your money, figuring in 8% in financing cost and taxes, you are making 1.5-2%. 2% on 300k is $6,000. That is really not worth it IMO. Plus you can't always count on the 15%. What if it is a fluke year and you only earn 10%? Then you are in the hole. If you are at a place in life where you can shell out 300K and have it not affect your livelyhood (ie less than 10% of your liquidity) what does 6K/year matter to you?