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"Creative" Finacing of an EXOTIC!

Discussion in 'Ferrari Discussion (not model specific)' started by kerrywittig, Feb 7, 2006.

  1. kerrywittig

    kerrywittig Formula 3
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    Nov 10, 2005
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    Kerry David Wittig
    I thought this might be of interest since I took the time to write it up........

    Quote:
    Originally Posted by AAN
    I think I am paying way too much.....7.25 % interest on a five year auto loan.....where can i find better rates ?


    I'll make a lonnnnnng story short!

    When I recently purchased my 87 TR I tried to do a home equity.......but made the mistake of telling the mortgage co. what I was up to...........NOT!

    Next was my local bank, who gave me an application that they could plug into many lending options they could provide.

    Well they needed a copy of the title and lien release from the current owner.
    I got the copies faxed to me by the seller and noticed that he had financed thru an exotic specific lender in MA.. So for the hell of it I called them and they sent me a 1/2 page app. and 15 minutes later they called and said your approved at 7.79%. Not bad...............

    Well I took the title and lien release to my local bank and told them that in fact the previous lein holder had offered to finance for 7.29% (felt a .50% decrease was in order! LOL) Banker said see what I can do and would contact me within 24 hours............
    Well he did...............

    Home equity at 6.2% no problem, but application fee/appraisal/etc.
    Car loan, 11% because it didn't fit into their "box" ...............BUT....

    He says ,"Hey Kerry don't you have a few CD's here?"..........Yes I do!
    Well he says, "I'll lend you the amount you want, secured by one of your CD's, at 1% above the interest rate we are paying you on your CD."!!!!!

    So to sum this up....I financed my TR for 1%, still have liquidity of my CD (which is still acquiring interest, compounded monthly) as it is payed down, no lien on the vehicle, and basicly a great rate. I was informed by my banker this is a common practice, that if you ask they tell, otherwise it's NOT the "moneymaker" they want, but are required to offer if it is brought up.

    So needless to say this is an option I will use from here on out........great rates/liquidity/no questions asked/I set the terms (ie. length/payment schedule/insurance/NO pre-payment penalty/NO lien)!!!!!!

    Bottom line I earn (for sake of demonstrating) $80 a month interest and pay $100 a month interest on the loan.......ie. $20 dollars a month interest on the "car" loan! And the CD interest earnings goes UP each month, and the loan interest goes DOWN each month...............

    Kerry
     
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  3. thecarreaper

    thecarreaper F1 World Champ
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    this is a great and very welcome post. it seems to me once you go over the $50k cash mark that it becomes difficult to justify paying cash if you can use credit and make the numbers work. on the old "cheap" cars i have been known for, cash is king. but Countachs and carb B Boxers are not cheap, and paying $65-$85 k in cash tends to cause problems and raise eyebrows. i am going to look into this ASAP. i will sell the Jalpa and get a Countach as soon as i can find a nice one if i can get a deal like this. i have a beacon near 800 and no dependants, there must be a bank out there that wants my business. i am so fed up with Bank of America, i want to cash out the small mortgage on my home and go somewhere else with ALL of my funds.

    thanks for posting this.

    michael
     
  4. spider348

    spider348 Formula 3
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    Curious why the bank would care what the funds secured in a home equity loan are used for? To pick round random numbers if you have $700k equity in your home and want to borrow $100k through a home equity loan does the bank have a responsibility to determine what the funds are to be spent on? As you can see I have never looked at a home equity loan, just curious. Would appear to be a viable low interest method to finance a Ferrari with possible tax benefits.
     
  5. ILuv4Res

    ILuv4Res F1 Veteran
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    On a cash-out-refi (which is what this is) I don't think it's the bank that cares, per se, but more lending guidelines that apply to lending on a person's primary residence. There are some things that you can borrow for, and other things you can't. The idea behind it is to help people from hanging themselves by spending equity on risky propositions.
     
  6. davem

    davem F1 Veteran
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    Ive used home equity loans for my biz, why not its cheap money. First rule.
    Don't ask, don't tell. Bankers are conservative. That and they are just doing thier job. Making money for the bank.
     
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  8. Mbutner

    Mbutner Formula 3

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    On the home equity line issue: My dad has used the home equity line of credit to do all sorts of things, such as buying cars, funding other projects, etc. Never once did the bank bother to ask what he was doing with it... IMO, you shouldnt tell them. If I have a large amt of equity and want to borrow $100k to roll around in the back yard with, then its my business. Take the house if I cant pay it back: thats why they call it collateral!!
     
  9. Z0RR0

    Z0RR0 F1 Rookie

    Apr 11, 2004
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    [idiot on]
    what's a CD?
    [/idiot off] [idiot off] ... damnit, can't turn it off, must be my default setting.

    Thanks for the heads up, definitely very interesting ...
     
  10. riverflyer

    riverflyer F1 Rookie

    Nov 26, 2003
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    Yes, I have to agree, what you use your home equity line for is none of their business IF all your paperwork, appraisals etc are in proper order. If things are close, then maybe they become more attached to dictating your program, but no one has ever asked me, or questioned my uses of equity money over the years.

    Michael, when you say using 65 to 85k in cash do you mean bills?
    Yes, that will certainly raise some eyebrows. I was in a dealership once and a guy had 30k in a brown paper bag for deposit on his car. They did take it, but it caused quite a buzz! I believe anything over 10k gets reported.
     
  11. jungathart

    jungathart Guest

    Jun 11, 2004
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    Most informative. Thanks.
     
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  13. ernie

    ernie Two Time F1 World Champ
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  14. SrfCity

    SrfCity F1 Veteran

    Nov 1, 2003
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    On a home equity loan just tell them that you are planning to do some rennovations. They are a great way to go especially as a back up.
     
  15. NYCFERRARIS

    NYCFERRARIS Formula Junior

    Mar 2, 2004
    999
    when I bought my boat, another purchaser came in right when i was there with 200,000 in cash bill -- benji's....for his boat. the boker was kinda freaked and was pretty pale but took it of course and he wasn't sure what to do so he went the back with the cash while he xeroxed all the bills.
     
  16. richard_wallace

    richard_wallace Formula 3
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    I was going to post the same thing - you can use a Home Eq Line for doing anything you would like - vacations, remodeling, cars, other homes, weddings, etc. etc. AKA 2nd Mortgage.

    And lets say you get it for 4.25 % - and then with the tax write off of the interest payments you are probably in the 2.x range.

    The other thing that I believe may be subject to look at. I was under the impression that when you secure a loan against your principal within CD's - that security/money cannot be removed (or at least the amount leveraged). So you might not be as liquid as you think - in terms of being able to withdraw against your CD - however I do like that Idea - as long as you don't need to touch the CD's for a while...
     
  17. thecarreaper

    thecarreaper F1 World Champ
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    yes, cash as in bills or bank to bank wire transfer. i have not financed any of the toys, and i bought a new nissian p/up in 2002 cash in person. seems with the more expensive cars, using credit makes sense as you can use the cash to make more money. the "cheap" ( under $50k ) cars are easier to just pay for outright.



    edit. i looked into both JJ BEST and Hagerty's classic / exotic auto finacing. JJ BEST's procedures gave me a headache with all the back and forth and faxes ect ect. Hagerty's set up was a little better, but both seemed geared towards buying a classic or exotic from a dealer. i would prefer not to buy from a dealer as i *think* i have to pay Georgia's 6% sales tax on the car if bought from a dealer. buying from a private seller requires no sales tax, just a bill of sale .
     
  18. Erich

    Erich Formula 3

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    In California, when you buy from a private party you pay the sales tax to the DMV when you go to transfer title. No gettin' away from the Taxman here.
    Georgia may be different, but I doubt it.
     
  19. jamesw

    jamesw Karting

    Nov 7, 2005
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    In florida you also pay the tax at the dmv. That' one expensive plate!! jw
     
  20. Dr Tommy Cosgrove

    Dr Tommy Cosgrove Three Time F1 World Champ
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    I am going to print that post and keep it in a safe place
     
  21. shmark

    shmark F1 Rookie

    Oct 31, 2003
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    If you have $700k in home equity you certainly are not managing your money very well. Home equity lines are certainly not cheap money and I can demonstrate you are losing a lot of $$ by doing it. Cheaper than a straight auto loan, yep. But there are much better ways to finance a purchase. If you are net losing money in a large purchase like this, you need to revisit the strategy.

    Simple math, total interest gained should always be more than interest paid, and your home is a good place to start. I believe in making my money bleed. :)
     
  22. thecarreaper

    thecarreaper F1 World Champ
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    read my post. we do not pay the 6% sales tax unless purchased from a dealer. the ad velorum vehicle tax is based on a set value set by the state, not on the sale price of the vehicle. the beater ferrari tags/taxes and title fees were less than $100 a year. the Lambo is an 85 so it was higher. i dont want to buy from a dealer ( ususally) and have to pay the 6% and the ad velorum taxes. i may have to with a Countach as there are so few around that are nice.

    i still think after the $50k mark, paying cash is not as wise as making the money work for you.
     
  23. Dr Tommy Cosgrove

    Dr Tommy Cosgrove Three Time F1 World Champ
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    For tax purposes, a bull**** bill of sale for about 2% of the real sale price works well too.
     
  24. rbf41000

    rbf41000 Formula Junior

    Nov 21, 2005
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    I got an equity loan on my house a few years ago.

    No closing costs
    No apraisal
    No questions (all they asked was value and equity and took my word fot it)

    Just a max loan amount and a check book for withdrawls.
     
  25. Mbutner

    Mbutner Formula 3

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    Totally hilarious. Have done that b4 when buying from an aquantance...
     
  26. spike308

    spike308 F1 Rookie
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    Care to elaborate?
    I need 65K in cheap money... gotta get another car!
     
  27. spike308

    spike308 F1 Rookie
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    Same in Illinois. Man, that was an expensive trip to get those plates! They did not even buy me breakfast!
     
  28. Erich

    Erich Formula 3

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    My brother tried that on the purchase of a Porsche many years ago.

    The seller gave him a call about 6 weeks later, wanting to know what he claimed. Evidently he tripped all the audit alarms and the DMV was calling the seller to check on the sales price............ YMMV
     

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