Do You Own, Lease or make payments on your Ferrari?

I would have thought quite a few people leasing or borrowing the money are doing it because they have say 8K in the bank towards a 40K car, can save another 8K a year towards it and would rather have it now via finance with interest payments included. Than wait another 5 or so years to pay cash since basically they want to enjoy the car now. Not really the same as having the money in your back pocket and able to pay cash up front instead of finance.

 

I owe. I could pay the car off tomorrow if I wanted too, the funds are in the bank. However, I dont think paying it off is the smart move.

I would rather pay the interest on the car loan, and invest the cash in investment property. I plan on purchasing 2 investment properties with these funds this year. They should yield well over a 10% return. Consider:


This is a real example. I did the mortgage financing for this guy.

He purchased a rental property in need of repair last March for $65K. He put 10% down and with all closing costs and such he had $11K in the home. He then spent $17K on repairs and improvements. At this point his total cash investment is about $30K. The property appraised for $125K. He did a cash out refinance for $110K. The new mortgage payment was $980 per month, the home rented for $1100. He paid off the original $65K loan, recovered his additional $30K cash investment and put an additional $15K in his pocket.... tax free. No tax due on borrowed funds. He realised a $15K return on a $30K investment in about 9 months. Now he is looking for additional property. I have financed 3 properties, all on similar type deals for this same investor over the past 18 months. He is not a pro. Just a normal working stiff type white collar guy who decided to get into real estate investing as a "hobby".

I have been kicking myself for not spending the time required to do more of this myself. Its not rocket science. It just takes time and effort. So yes.... I will keep my cash and use it in this type of manner and keep paying my car loan.

 

Kds,

I really have no emotion regarding owning or leasing a car. But each time I compute all the numbers, buying is cheaper. I agree that if the car is damaged, leasing is probably a good deal, although you have to pay high interests until the lease term.

If ran numbers for scenarios including keeping the car from 4 to 32 months, using some real quote and depreciation schedule. Every time, buying is cheaper.

I have done this using a quote from Premier. Can you think of any other company providing better deals?

Thanks

ACW

 

ACW......

Sorry, but I am in Canada, so I cannot help you with comparative quotes.

It`s merely my opinion that the benefits and flexibility of using "OPM" far far outweighs the small premium that it always costs you in the long run, versus typing up your own capital in a car.

Eventually, you will have it paid for if you lease or finance, if it turns out it's the car you want to really keep.

For me anyways, it comes down to what kind of car is it, year, model,etc.......the price and future depreciation possibilities.......an analysis of the economy from both a personal and overall point of view, intneded use and write-offs....cost of funds...opportunity loss...etc...etc....just like you said earlier.

How much money are you talking about, that you stated you would save in your analysis anyways ? Could you tell us what your rough numbers were ? That is always the biggest factor for me when counselling a client.

---------------

Regarding the emotion/logic point, I run into people who say "I would rather own it" all the time.....to which I reply....well...if it's leased do you return the car to their parking lot every time you don't use it ? Who washes, waxes gases and repairs it anyways ? You do. It's purely an ego thing I think...............you can borrow money from yourself, or from someone else to buy a car..............but it's gotta come from somewhere and it's going to cost you..............either in interest, piece of mind or lost opportunity.

It's an interesting and sometimes gut wrenching decision for people...............you've got to do what makes you happy.

 

Hey springer, what part of the country are you in?

 

steal a new one every month. you can almost always outrun the cops in a late model ferrari.

ZOOOOOOOOMMMMMMMMMMMMMMMMMMMMM

doody.

 

"Never finance a toy" doesn't make much sense. I agree that you should never over-extend your financial position to buy a toy, but if you have cash and can choose between the two options, financing versus cash purchases are all about opportunity costs.

When I bought my Porsche the market was strong. I had money in the bank to pay cash but chose not to as I could get a better return investing. When the market turned south, I paid off the loan as that was the best return I could get on the money.

When I bought my F-car I had money in the bank, and again chose to finance. Right now I have little worry that I won't earn the 4% after-tax returns I need to break even on the financing. If opportunities dry up, then I'll pay off the loan.

Leasing vs buying is all about guessing residual values correctly. On the whole, the leasing companies are better at this than consumers. Afterall, thats how they make money. If consumers won more than the leasing companies, we would not have leasing companies. While in the last year or two comsumers have won the leasing game, its a short term anomoly.

 

a question:
308's are pretty much done depreciating.say i have the $30k CASH to get one, but its almost all of what i have .( in cash, not " assets") would it be better to use a home equity line to pay for say half the car, and pay cash for the balance? then i would pay myself back and write off the intrest on the loan. when i get a car it will be a long term purchase. i rarely sell my cars unless i am hunting something big ( like a ferrari). seems bieng a long term purchase on something that will hold or may even gain value i cant loose?! maybe i should put this in a thread, sorry to hijack this one. a few opinions will be nice and i promise i will shut up!!!!! thanks, michael

 

YES, ME!!

 

Isn't it simple math?
I mean, why would anyone buy with cash, if they can invest cash at a return higher than loan interest rate?

Like someone else said, unless they are too rich and they do not care, just easier to do a wire transfer than remember to write checks every month, good for them then.

 

Own.

 

I own also although I can agree with much of the logic for financing. I guess I am more comfortable owning cars outright.

 

Personaly I think most of the folks who say they own thier cars outright in the poll are full of it. Not too many people can afford to buy a 200k car in cash. Now if the people in the poll own lower line Ferrari's like I do 3x8 series then I can see it. But the 100k and up cars are very much leased. I would assum that the majority of the owners who posted in the poll have already payed off thier cars..so ineffect they aren't making payments ANYMORE!

How can I say this? I work in th eindustry and I know how these cars are bought and sold. Most are leased on 3 year plans and flipped after. Many are drivin with disconnected speedo's so they can drive longer distances without the milage penalty..hence all the low milage Ferrari's around. If the person bought the car outright..then there would be no need for false milage claims.

There is nothing wrong with making a payment on a car as long as you can afford to do so. If the 1200 a month is no big deal..go for it. I would personaly use the cash money I would have spent on the car, towards somekind of investment to get a return..not lose on a devaluing car. I think most on this board know that. That it why i think the "own outright" poll is crap.

 

Couldn't agree more! I have around $1m worth of cars at the moment. There is NO WAY I could justify tying up that much cash in toys.
I have a couple of road and race Ducati motorbike worth between them around 60K USD which I do own, because they are smaller ticket items. There are plenty of seriously wealthy people who can afford to own them outright, but in my experience, most of them lease through businesses too.

 

My Boxster S and carb'd 308 are OWNED!!!

I've thought about financing and all that, but I'd have to seriously have opportunities available which would give a higher ROI than the cost of funds to buy the car.

Lately, I have thought about leasing a Diablo or 550 with option to buy for a short period just to see if i like the car. If i don't like the car as much as I thought, then it's a simple matter to change when the lease is up. If the car does something for me either in comfort, style or smiles per mile then I'd squeeze the trigger and buy.


At the end of the day, I'd rather own a humble 308 outright then be in hock up to my eyeballs for a 360 or Gallardo.

 

I paid cash for the last Ferrari and the Porsche. My wife paid cash for her Lexus. We paid cash for our house.

What is this debt thing you people speak off?

There is a big difference between thinking one is wealthy or rich driving a leased car and not giving a damn and having nothing to prove.

I read a statistic not so long ago (I think in the Economist, but I can't remember) that said 25% of Americans thought that they are in the top 5% of income earners. So that means a good, solid 20% of Americans really are deluded.

 

Erik,

Debt can be both a good thing and a bad thing.

It is a great tool to make money (e.g. leveraging real estate), but in the form of credit cards isn't great.

Saving money is a good thing, but there are limits to how much money can be saved vs. the growth with investing...especially in the long term.

Unless you make a very high salary (i'm guessing north of $250-300k), it'll just take so long to save money to buy the kinds of cars people on this forum are enamoured with.

Since most people will not be able to get those jobs, or own businesses that can create that kind of revenue, they invest.

Plain and simple. You should invest money regardless of salary...whether poor or affluent.

 

Probably true! What is the income level of the top 20th percentile? I have NO idea...

Ken

 

In 2001, it was 72k+ family income. Top 5% is 147k+. See it here.

 

The funny thing is, I've seen several people on this board talk about how they paid cash for their car..........using a HELOC

-R

 

I own my cars and my other stuff. No debt in the US. Had a bad experience coming back from living overseas for a number of years re: identity theft and have decided to extract myself from the "big brother" credit reporting system in America.

Like others have said I use OPM to make money but not for toys. Periodic toy purchases are factored in to my longer-term projections (gotta reward oneself from time to time, no sense being the richest corpse in the graveyard) so they don't detract from the overall plan.

Cheers
Kevin