leasing a ferrari

Good point. When I looked into the Ferrari closed leases the higher residuals and perhaps higher money factors really skyrocketed the payments over the open leases. Of course, there is less risk here because if you do keep the car until the end of the term you can just turn it in. But you will also be liable for the restrictive mileage constraints.

As with any open or closed lease, you can really get out of it at any point. The payoff schedule is just more linear with an open lease. Closed leases front load the interest payments like a mortgage, so you're paying very little principle at first. In a lot of cases it makes more sense to just stay in the closed lease than payoff early.

But in all of the Porsche leases that I had, I only ran one until the end of term. They usually have 6-12 month accelerator programs that give you the option to get out of the lease early at no cost if you purchase another car from them.

With Ferrari this is handled less formally in the relationship that you establish with your dealer.

 

I'll take a stab here.

My California was $2600+tax and the 458 is about $3100+tax. In my CA county that adds up to $2800 and $3400 respectively. Its hard to do direct comparisons though as the msrp of the cars you are leasing will drastically raise or lower these numbers.

But as stated above, it takes about a minute on the phone with any of these companies to get the full disclosure on all of the lease factors.

Your point about the negative effect on some clients is a good one. It can be advantageous in some situations when bonding with executive clients that might share the same passion for the cars... and a negative in some cases where your client would potentially question your fees. This can also have a backlash from your employees.

The business justification for me comes to down to if I'd rather have the money sit in the bank account and pay more corporate tax. Every business situation is different though and if you're spending money on a car rather than something that could help grow your business then it might not be the best decision.

Of course all logic goes out the window you put your foot down and hear that noise.

 

Aren't you subject to the AMT? If so unreimbursed business expenses (like business use of a personal car) are a preference item and those deductions are phased out the higher your adjusted gross income. For me AMT effectively kills this deduction.

 

Make sure you are squeaky clean. If they ever audit you and they see that, they are going to look at every entry of your return.

In past years I have actually foregone some deductions I was properly and legally entitled to because it just isn't worth the hassle to incur an audit.

 

Higher residual should make lease payments lower. The lease is based on difference between cap cost and residual. That's why I lease BMW for business. 61% residual at 3 years with 3% interest rate is pretty hard to beat. My understanding was the closed end Ferrari lease had a low residual and high interest rate making it cost prohibitive say compared to my current 6 year loan through Chase at 3%. Fwiw a down payment wasn't required for my loan I just rolled over my deposits I made with the dealership when placing my order and the equity I had after trading in my California (sales tax only on difference between Spider and tradein).

 

Using the lease price of $3400 per month, we can project the expense difference and compare leasing to owning over a 3 year life.

Depreciation over 3 years is the same for both options. So assume you drive the car 5k miles per year, then you are probably looking at $10k per year plus $2 per mile so over the 3 years, total depreciation hit of $60,000

Purchase
Assume MSRP = $280,000
CA tax = $25,000
Total price= $305,000
Resale value = $220,000 ($280k - $60k)
Total cost over 3 years = $85,000

Lease
36 X $3400 = $122,400

So the lease is $37,400 more expensive than owning over 3 years, or about $12k per year. In order to break even you need to earn a little more than 4% per year on your money.

 

You sound just like my CPA hehe. I keep a physical log dating all business miles in writing.

 

4% after income tax mind you. Find me an investment that returns 8% guaranteed day in and day out over 36 months.

 

Well for example you can buy CA revenue bonds yielding 5% that are exempt from taxes. I was surprised at how relatively close the 2 options are, I always buy my cars and have never considered a lease. If you can deduct a % of the lease against your taxes then that makes it even closer.

 

Good point. With my higher end cars, I have always bought as well. I remember looking at Porsche leases years ago when I bought my 997.1 C2S and they were not good at all, like 50% residual and 8% interest 3 years.

 

How does the AMT effect this write off for you? Are you subject to AMT? If so then I believe the write off against taxes is considered a "preference item" and is phased out. I could be wrong on this point as I am not a tax accountant and have never played one on TV.

 

A great question. I honestly don't know. This was not in force when I had my 360. I will need to consult my accountant.

 

I understand completely. My point was very clear.

Yes you can if you'd like write off some of the lease. Some.

You used a 100k car when we were talking about 300k cars. That's a huge difference and as you see above someone showed the math finally as I have no clue and wouldn't finance a toy ever.

So in the model he shows A $40k larger expense to lease vs owning.


So you lose more money and write off a small portion and flag the IRS with a Ferrari write off.

Interesting approach. Seems not worth the $10k write off.

 

Well it's all about math. So people are discussing their ability to make more money by leasing.

So it's not a big deal IMHO to show your math unless you are even more backwards than I think.

Plus it's an inter web forum it's not public

 

Thanks for showing

I really don't care to call a place I won't ever use.

Just like to see why people choose lease

 

ok. you win. I paid $10,000,000 for my car and the payments are $10,000 per month. I put $1,000,000 down. Is that backwards...er...forward enough for you my dear sir? Contact Premier for details for your deal (cough...cough...troll...cough...cough).

Kisses

Doc J

 

Yes. Sorry... meant to write "lower" residual. But you're right that the closed leases aren't great right now with Ferrari due to the residual and interest rate. My understanding is that very few people go this route.

 

I recall throughout 2013 a Ferrari dealer's website had the following Ferrari Financial Services "closed end" lease listed for a new 2013 458 coupe. The numbers I believe were:

$249,379.00 MSRP; $2,529.00 pre sales tax payment; with a residual value of $188,500 and 10% cap cost reduction down payment required.

I just looked and it is gone now. Maybe Ferrari FS does not want 458's back in 2 years as they will be too deep into their model run and be worth less than the residual?

Cool thing about it was that the risk of the market value was on Ferrari FS and the term was only 24 months.

 

249379 x 0.10=24938
2529x24=60696

249379-(24938+60696)=163745

I would bet one could sell this 458 for a lot more than $163K after 2 years of ownership with less than 7000 miles.

 

This is very helpful. For the 458 on a 60 month lease with a monthly lease price of $3100 what residual value at the end of the term did they use to come up with your payment? Was is 50% of MSRP?

Thanks,

Larry

 

This is VERY well stated especially point #3 with the huge sales tax advantage and point #6.

 

Seems you got a great deal. Well done.

 

That one looks to make sense. Ferrari knew the market was dead and needed too be their cars. Looks like a good deal for both.

Ferrari discounts their cars with fancy financing no different than Mac dumping at $50k off of msrp.

This explains the massive number of new Ferrari owners in brand new models.

Ferrari did well to stay ahead of the slowdown by hedging this way. Well done in my book.

 

So my 458 lease is actually on a used 2012 and the residual is $131.5K, which ends up being pretty close to 50%.

The 2014 California I did before was a new car and the residual value ($127.5K) was fixed. This is how Ferrari handles open leases on new cars... and I believe was the same with Putnam and Premiere. So this means that residual is not based off a percentage of MSRP. This will be a factor if you are trying to lease a heavily optioned car.

 

I leased my 2013 458 Spider. This what what I worked up based on the MSRP ($325,000) of the car:

Closed end Lease:
Residual value after 5 years - $155,000 (wholesale value, not retail value)
Money factor (interest) - 5%
Monthly payment - $4000
Pay sales taxes upfront: $17,000
60 months of payments plus buy at residual totals $395,000

Regular finance:
Everything same as above except:
Pay sales taxes upfront - $22,750.
monthly payment - $6200.
60 months x 6200 = $372,000.

Monthly payment difference of $2200
Pay out of pocket of $155k at end of lease to own outright will cost $20 k more leasing vs regular financing if not financed.

Conclusions:
Leasing looks better from a cash flow basis if Sell/trade in car before 5 years (3-4 yrs) for new future model and expect value of car not to be far off +\- the residual.