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Financing Methods

Discussion in '360/430' started by JohnnyHooks, Oct 14, 2007.

  1. JohnnyHooks

    JohnnyHooks Rookie

    Jul 15, 2007
    44
    Just wanted to get an idea on how you guys purchased your first F car....or exotic in that case. I know some of you, based on your profiles, are in a position to buy some of these vehicles cash. [I wont mention any names, but people like those that own an Enzo, Mayback, Lambo, and GTC ;) ] I mean, thats a different echelon of car owner than where I at.

    I guess I should ask some questions to clarify my question. Did many of you just buy it outright cash? Did you put money down and finance? How many years was your term if you did and what kind of interest rate did you find comfortable and acceptable? What was the percentage of money down.

    I am into real estate and fairly young, but I would like to acquire a 2004-2005 360 spider before my grandfather isnt around to see. I mean, there is only so much I can do, and I need to first make my personal residence purchase which is something I am looking to do. But, I don't want to be a slave to the car. While the old adage is if you have to ask how much, you can't afford it. however, I am looking at scenarios where I can afford it without pouring 165k into a car. Maybe go with 120k and finance the rest. I guess it comes down to twhat state I am in in regards to cash flow. Thanks for any input.
     
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  3. AlgaeHater

    AlgaeHater Formula Junior

    Sep 22, 2004
    321
    Bellevue, WA
    Let me get this straight, you don't own your own house/condo and you're thinking about buying a $160K toy?
     
  4. Blue@Heart

    Blue@Heart F1 Rookie

    Jun 20, 2006
    3,734
    Yellowknife, NWT
    Full Name:
    David
    If you're concerned about "being a slave to the car" then I wouldn't buy it....


    That's my personal opinion.

    From what I've read on here the general consensus is don't finance, cause if you can't buy it cash (even if you've saved up for it) then you can't afford to maintain it.

    If you have 120k to play with then buy a house, build some equity. There will be plenty of time to buy the toy...

    Just my opinion
     
  5. Joe Mac

    Joe Mac Formula 3

    Johnnyhooks, as is typical on FChat, you will have a lot of people giving opinions on something you didn't even ask (like the 2 prior responders). Just the nature of the forum I guess.

    Anyhow, I will attempt to answer the questions. I'm currently driving my third Ferrari. I owned a Modena for which I paid cash and spider for which I paid mostly cash and a small ($30k) loan.

    The latest car, I chose a completely different route and I have never looked back! I purchased the car for around $202,000 (which included a Ferrari Power Cube warranty). I didn't want to sink that amount of money into a car that depreciates IF and only IF I could borrow for less than what I could easily invest dollars for. I first toyed with the idea of an equity line. Being in real estate, you should know that if the line interest is 8% and you are in the 40% tax bracket, the line interest is really only 4.8% if you can include interest payments on your tax return. I chose not to do that because I didn't want to tap into a line (because I use it for real estate plays if I can find them and immediately purchase....).

    So, I chose a long-term loan program run by a credit company called Woodside credit. They offer large loans for exotics and, at the time I took out the loan, the interest rate was VERY competitive. So, I put $100,000 in cash and $100,000 in a 12 year loan at 6 1/2% interest. At first blush, you look and say "why would you want a 12-year loan"??? The answer for me is that I know that, at most, I will own the car for 2 years and sell it OR just pay it off in cash. So, the benefit is that I borrow for 12 years at the same rate as borrowing for 5 years AND my payment is very small. I think I pay $1,300 per month. There is good and bad in this approach. The biggest "bad" in my eyeys is that this isn't smart for someone who spreads a payment just to afford it. DANGEROUS.

    As for whether to buy a house before buying a car, do what you think is right. Don't listen to all these schmoes with advice on life. It's about as good as mine :)

    let me know if you need any more info on this.


    Good luck!

    Joe
     
  6. Steveny360

    Steveny360 F1 Veteran

    Sep 5, 2007
    6,888
    I pay using equity in real estate I own. Works out pretty good for me. I end up paying the depreciation of the last car when I am driving the next car.

    Here is an example...
    The last car I owned was a SL55. My total cost to drive that car for 11 months was 15k. I just bought a 360 spider and plan to keep that for a year. divide up the 15k over the next year and pay it back. When I sell the 360 I will do the same with what ever the depreciation is on that car. if you buy the car right your payments using my method will never be the size of what the loan payment would be for the entire amount of the car, even over 120 months.
     
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  8. ErikV10

    ErikV10 Formula 3

    Oct 30, 2006
    1,646
    I always finance a car even though I can afford to pay it cash. There are better ways to put some of the money than putting it all on a car. That's just me though.
     
  9. E60 M5

    E60 M5 Moderator
    Moderator Owner

    Jan 2, 2006
    6,779
    Wash DC area
    Full Name:
    Robert
    I put about 15% down and financed the rest on my 360. I have a 72 month loan at 5.5%. I probably should have gone with longer term loan and saved the extra cash, but wife wants things payed for!

    On other topics, stay away from debt in your young age! Don't be in such a hurry, society dictates we all grow up way to fast! There is more to life than cars and real estate and material possesions. If you care, my wife and I started small, rented apartment, bought townhouse, moved up to house, then moved up to bigger house, building each time.

    Life is a long distance race, not a sprint!!!!!!



    Robert
     
  10. lizard1

    lizard1 Formula Junior

    Dec 8, 2004
    408
    West TX
    Full Name:
    Frank
    Joe - i've just purchased alot more real estate than originally anticipated so my "toy" fund is rather empty. are you saying that the interest on a home equity loan is tax deductible? like all other physicians, i am somewhat oblivious to the ins and outs of tax scenarios

    thanks!
     
  11. Ricambi America

    Ricambi America F1 World Champ
    Sponsor Owner

    yes.
     
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  13. carcommander

    carcommander Formula 3

    Sep 28, 2006
    1,705
    Southeast
    Full Name:
    Jim
    When I was younger in my 30's I, through creative means, owned all sorts of cars (Not Ferraris). 20 years later I only pay cash. I guess it just depends on your risk tolerance. Debt = Risk. Risk you can't pay it back, risk you will be upside down in it and need to sell it. If you use your money or someone else's you still have a bunch of money in a toy. Life is short, Ferrari's are dream cars. I am not sure I would buy a house right now (I own a great one) I would let the next 6 to 10 months go by and see what happens. Now if you can steal it. :)
     
  14. azew

    azew Formula Junior

    Jul 4, 2006
    463
    New York
    Paid cash for all of mine - I personally would never buy a toy (which I consider my F Cars) unless I could well afford it.

    Essentials, such as a home or a daily use car - if not affordable via cash are totally appropriate for leverage; however, my personal point of view is to NOT buy a Ferrari (or boat, or other luxury itme unless I had plenty of cushion in cash. Why be a slave to a non-essential?
     
  15. Joe Mac

    Joe Mac Formula 3



    Daniel's unconditional "yes" is not such a certainty, but GENERALLY, they are tax deductible until you reach the IRS limit on deductible mortgage interest.
     
  16. Ricambi America

    Ricambi America F1 World Champ
    Sponsor Owner

    Good point... me forgotest about thy smallest point of ye ol' tax code.
     
  17. ttforcefed

    ttforcefed F1 World Champ
    Rossa Subscribed

    Aug 22, 2002
    15,741
    deductions only really matter if u dont make alot of money. Once u r making $500 or $600K a year deductions phase out aggressively. $1.5M a year and above u can kiss all ur deductions good bye, even on ur primary residence.
     
  18. SoftwareDrone

    SoftwareDrone F1 Veteran
    Regional Sponsor Rossa Subscribed Owner

    Jan 19, 2004
    6,370
    San Jose, California
    Full Name:
    Mike
    If someone is standing in a burning building and asks me if he should eat Cheerios or Lucky Charms for breakfast, I'll forego my opinion on cereal tastiness and tell the person to get out of the burning building ASAP, regardless of the fact that I may be criticized by not addressing the issue at hand. Buy a house before you even think about buying a Ferrari.
    Now, to answer your question, I put $90,000.00 cash down on my 2000 360 and financed the remaining $50,000.00 over seven years at 7%, resulting in a $606.00 monthly payment. That was 1 1/2 years ago. I'll have the load paid off in another six months. This of course was after I purchased two homes.
     
  19. Joe Mac

    Joe Mac Formula 3


    pretty extreme a metaphor to make your point. MY point is that you assume (simply because you presume the reasons for his lack of owning a home) the reasons for his question on financing his car. Why make those asumptions? Why not simply answer his question. Not a big deal, just typical male crap.
     
  20. Joe Mac

    Joe Mac Formula 3

    PM me if you'd like better tax advice :)
     
  21. Sanj-

    Sanj- Karting

    Jul 1, 2007
    239
    Vancouver
    well said. i agree, house always comes first before even thinking about investing into a vehicle, unless of course its going to be used on a daily basis..

    me and my family are more into the leasing side of the business as far as vehicles go, we get them at a low rate and it allows us to keep the majority of our money as working capital in our business; so leasing is always an option for you. your grandfather would be more impressed to see his grandson living in his own home and building a successful business then to see him driving around in a ferrari...do the right thing, look into a house first.
     
  22. BH1

    BH1 Formula Junior

    Nov 14, 2005
    253
    NSB, Fl & Aspen, Co
    Full Name:
    Brett
    Buy the car. Dont worry about the naysayers on this forum. These guys are also the ones that are born into money and dont want the "exclusivity" of the F car watered down by a young buck financing it. Soon enough you will be saddled with responsibility...... get out and have a good time! (This is predicated on the idea that you earn enough to have the car and not struggle with the payment, insurance or upkeep. We wont even discuss putting mileage on it!)
     
  23. campbell53

    campbell53 Karting

    Oct 5, 2006
    96
    I financed my 99 360 Modena for 60 mos. I put $15,000 down on a $105,000 selling price. I would suggest that you put enough down to show the bank you are serious (my bank hasn't done an exotic before but my strength and history with them convinced them to write the loan...a little leverage never hurts!). In addition, I will never be upside down in the car. I can always sell it even at a fire sale price and get out (hopefully that will never be necessary).
     
  24. 410SA

    410SA F1 Veteran

    Nov 2, 2003
    8,391
    West Coast
    Full Name:
    A
    Just my opinion but I believe you should never finance a depreciating asset. You will take a loss not only on the interest cost which is an outright expense to you, but you will also incur a capital loss when you sell the car. Add the two numbers together to find out what your weekend toy cost you. It will be a surprisingly big number.
    Now, if you start buying older, rare cars that are likely to appreciate in the long term, a program like Woodside, or an even better, a tax deductible Putnam pseudo lease, makes perfect sense.
     
  25. mchas

    mchas F1 Veteran
    Silver Subscribed

    Oct 5, 2004
    5,048
    Los Angeles
    Full Name:
    Mark
  26. Drive550PFB

    Drive550PFB Two Time F1 World Champ
    Rossa Subscribed

    I have written several times with personal stories of people who purchased Ferraris with too much debt. I have consistently predicted the falling of prices. Look on the 550/575 board, and you will see dozens of stories about 550s at historically low prices. You will see "Can a 575 be priced this low?" all over the board.

    Having said that, you don't have to start with a 360 or a 430. Why not look at a 328? Great car at a great price, and you can still find lots of them with less than 30K miles. If you have 50+ in cash, consider a 348. If you have 75K in cash, look at early model 355s.

    Take my word on this . . . housing prices will continue to soften. Home equity will evaporate. It is bad enough to lose a car to foreclosure when cash gets tight, but to lose a car AND a home is a downright shame.

    Life is a marathon, not a sprint. I know you think you can't wait, but the world will keep on turning.
     
  27. JohnnyHooks

    JohnnyHooks Rookie

    Jul 15, 2007
    44
    Much respect for doing some research before answering my question.

    To clarify some things, I am not looking to decide between the car or the house. Regardless, I am going to purchase my first residence before i purchase the car. I am not that guy that is going to have a Ferrari and live at home, its just not me. Not because of what people would think, but because of the mental block I have living at home. I got a lot accomplished, academically, mental growth wise, physically, as well as spiritually while I lived on my own in college. I need to be on my own to cut away ffrom a lot of things and kind of light a fire under me if that makes any sense. I always performed bettter with a lot of responsiblity on my back. Instead of stress, I usually became more efficient.

    My business partner and I, being in real estate have a couple of views. First is to put our money from our first deal, even before we finish the deal through alternative income, into a income generating property (apartment building with partners, or a 2,3-family between the two of us). Also, I am not a big fan of purcashing something that depreciates, but the Ferrari is something different to me. It is an investment because there is meaning to the car, which you can find out about if you search my posts. I am going to drive this car, maybe more than a couple times a week, and I don't look to buy it and then sell it after two years. The only reason I would sell it is because I was in a financial position to afford a F430 Spider.

    Hope that explains where I am coming from a little better, and thanks for all the opinons. While I am the "you only live once" kind of guy, there are some things I need to take care of, and thats investing into personal real estate and establish some passive means of income so my time isnt spent affording the car since that time needs to be spent building my business. I am also doing a lot of searchign since I am interested and knowledgable in many fields branching off of real estate such as distressed loans, NPL and REO portfolios, mortgage backed security market such as cmo's, cdo's, etc. So there is a lot i want to do and cannot lose my focus. While some define the F car as a toy, to me it is a more of a personal representation of events that occured in the past. There is a sense of meaning to it.
     
  28. leead1

    leead1 F1 Rookie

    Nov 29, 2006
    2,823
    Florida
    Full Name:
    Lee
    my humble opinion is if you have to fiance a car like these you can not afford it.

    Lee
     

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