My thoughts on financing an entry level Ferrari onudget!?!?

Paul,

You are absolutely correct. No offense taken here. We ARE ALL CRAZY. There is NO sane reason to own a Ferrari; none, nada, Zippo.

As to your last paragraph, +1. I have to readjust my transmission and "while I'm there," change my shift shaft seals. Someone here receintly paid $600.00 just to change $13.00 worth of shift shaft seals and a new gasket. Huh?!?!?! WTF?!?!?!?

I can afford that type of bill (and thus, I think, award myself "competant owner" status) but I vowed I would NEVER allow myself to. I do all my own work WHENEVER possible and this is the 1st car I have ever really wrenched. Cutting my mechanic teeth on a Ferrari, Sheeeeeeh! But the rewards are unbelieveable. Working on a pretty nice tool set too even if I do say so myself. So far I have about $6-9K worth of work in the car but actual cost of about $3-4K. Saving for that Shelby.

 

Ya know, I am in a very similiar situation. I am not rich by far and among adults I would estimate that I am really on the low end of the income bracket on this board. However, my wife has agreed that once I get back to the US (currently in Belgium) after the first of the year I have to buy her a small SUV then I can buy my 308. I most likely will have to finance the Ferrari and the way presented here by RAMMER is really a viable way to live out my dream.

I have wanted to own a Ferrari 308 since the early 1980s when I saw my first one. I think it has been one of the most beautiful cars ever made.

I do have other cars (Expedition and a Trans Am) which will be my daily drivers in addition to my wifes car. So yes, this will be a "toy" and I will do whatever I can to reasonably own one.

Anyone know of one coming up for sale??


PDG

 

Patrick,

You work at SHAPE?

Mark

 

As a matter of fact I do....




PDG

 

Im down in Heidelberg and there is another US Civil Servant F-Chatter (Erich) in Wurzburg.

 

The post is talking about temporary ownership and its associated costs. The borrowing on a home equity line is a means to get the car. The payments are interest only, and when you are done with your ownership experience you sell the car for no profit / loss. It is an example of how to buy a Ferrari for those with the dream but not the 'apparent' means. Creative thinking can get you from dreaming to driving in this case. I also used my HELOC to buy the 348, but only for a month IIRC.

BT

 

Excellent post. I'd rather finance a Ferrari than a McMansion anyday (or any house that was more than I needed).

 

Here we go again. No one chastises those who wish to pay tens of thousands over asking for a new (depreciating) Ferrari, but there's no shortage of people who like to give economic lectures on "buying toys with cash" and how irresponsible it is to "finance a toy". Isn't this kind of hypocritical?

Enjoy your new car. You only live once.

RMX

 

Sounds like you're buying a Ferrari just to buy a Ferrari.

 

I actually AM a teacher, and I make $10k/year LESS than you guessed. I bought my Ferrari for cash.

 

The thread title is "My thoughts on financing an entry level Ferrari..."

I guess I read that and got the idea that it was about financing a Ferrari for guys who want their first Ferrari and can't pay cash.

I hereby chastise both.

Manage your money, build some financial security and then -- if a Ferrari is what does it for you -- buy one, free and clear. If it's a new model, and you get led to the over-MSRP slaughter (like the savvy guys who paid $30K for the first Miatas or $60K for the first Elises), make sure it's cash you have to burn.

I love cars, but there's bigger stuff in life.

 

I'm not a believer in tying up lots of cash in depreciating (or even stagnant) assets when one can use his cash to work for him in far better, more productive ways.

For example...when I bought my 348, I financed 100% of it. $40K total. About two months later, I bought a rental house, putting down approx. $20K, and, even if the house doesn't appreciate a single dime over the next 15 years, it will be completely paid off in 15 years, and my $20K will have grown to $150K. And that's with just HALF of the $40K! Rinse, lather, and repeat this drill a few times and you're on your way to some serious financial freedom. Why on earth would you sink the $40K into the 4 wheels sitting in your garage?

Heck, you can find plenty of solid STOCKS (if you must - commodities are much better for the next decade), where the DIVIDEND YIELD ALONE is more than 5% annual!

Keep your big chunks of cash. Better yet, make the chunks earn something for you and your future. If nothing else, plunk your $40K into the S&P Energy Index and, in 4 to 5 years, you'll have the money for 2 Ferraris in all likelihood. When China quits growing you can find another investment.

The Ferrari you're buying? Put it on a line of credit and make your minimum payments. You're going to be trading it off in 2-3 years anyway.

 

People like yourself are the heroes in my life. Extremely inspirational and it is EXACTLY what I preach and what I try to live by. Thanks for sharing your thoughts.

Gustan

 

RMX,

RANT-ON: I would chastise folks in that other thread, people paying way over MSRP for a new car from a dealer but the whole basic idea, to me, is too stupid for words. Hence, no post. Then you throw in the rest of the problems the OP is experiencing and ................ Ferrari will never get any of my money either. The whole “List” thing to buy a new car is ….. and then only a dealer can “flip/resell” a car less than one year old?!?!?!??! ….. Then the dealer loses the right to sell two cars if a new private owner flips one into the secondary market. WTF?!?!??! Are you goat-F&*@$^#g kidding me? Hell, again I do not have the words. I'll stay in the 15+ year old market, thank you. Too easy, no drama, low price and the cars LOOOooooooOOOK so much better. It is getting hard to tell a Ferrari from an Austin from a Maser from a …… Toyota from a Nissan. They are all starting to look the same to me. Garbage. Ferrari could be doing oh so much better….. RANT-OFF

I do not “chastise” anyone for financing a Toy, but I think it is a near sure-fire recipe for disaster. After all it is their (borrowed) $. I bought mine from a guy who needed to sell because he was in his 60’s and beyond broke as I have been told (never met him). He needed cash. He didn’t get much because among other things he had to pay off the loan on the car. IF he owned the car outright he would have come out much better on the deal.

RANT-ON: How many F-Cars are out there broken and unloved because someone who thought they could “afford it” via creative financing and found out when it broke, they could not? I bet LOTS (mine was one). We see them on eBay, AutoScout 24, etc., constantly. How many of these wind up as donors when there is no real need for that outcome? Again, probably “lots.” Part of “responsible ownership” is being able to take care of it, don’t you think? Most “creative financing” endeavors only allow one to slip behind the wheel; nothing more. I think the great marquees of any industry (automotive, aircraft, furniture, firearms, etc.) are owed better than that. RANT-OFF.

I just abhor debt, unless someone/institution owes me. That is all. Nothing more or less. Parents drove that into me with a 20lb sledge. Owing more than $300 on my charge card gives me the he-bee gee-bees. I could EASILY buy a N I C E car (including another 3x8 F-Car) on my Visa or MC. I'd still have plenty left over for servicing too. But that is beyond stupid. It took me many months to calm down after buying my house (now own about ¾’s of it and sleep better at night).

Now, if the market (stock, housing, etc.) will tank just a wee bit more (I've LOST plenty again ) I’ll be able to find just a couple of more donor car parts I need and I’ll be finished resurrecting my owned Toy.

 

Ferrari 308 GTB, one of the prettiest Ferraris out there. Grats!

 

RAMMER,

You are a teacher or using that as an example? Regardless, "you" made that career choice knowing full well you would NEVER be able to keep up with the Jones'. Yet your dream is to upstage the Jones' (w/a Ferrari)? You claim you are doing a "Public Service" telling people how to risk their financial well being to own a dream? Sorry, I cannot in good conscience agree.

I believe I and an amazingly few others, are doing the same Public Service announcement and saying "NO" to financing a Toy. Pay cash or find a way to earn more money. Borrowing for nonessentials is just plain wrong IMO. No one is "owed" a favorable outcome on a dream. That is why I was 47 before I got mine. Could have gotten it much sooner on credit of some kind, but "NO." Cash and carry .... for Toys.

P.S. Bradley can teach my kid ANYTIME. I can bet he'd git sum gud learnin and addvice from that owner/teacher.

 

Husker,

I really like the investment parts of your post. GREAT STUFF. THAT is how you afford toys. I need to talk to you in PM.

As far as this quote though, "Why on earth would you sink the $40K into the 4 wheels sitting in your garage?" ... because I don't want to sink $60K in that car via financing like you probably will. Plus I am not planning on selling, not ever. I might just bury myself in it ..... nah, thats already been done.

 

+1

If you love Ferraris, the best thing you can do (for yourself and the car) is buy one you can afford.

 

Rammer

Thats a beautiful 308 and darn well good for you that you did this for yourself. Screw what we think. There are many ways to skin a cat and you figured out your way. Good for you! Enjoy.

 

When I was 26, I bought myself an NSX - it was a year old at the time and a stretch for a guy that age. I enjoyed every minute of it and paid it totally off (sold it later, but that's another story). The car, nor the payments, nor the interest made me broke. I had a great time with that car and would never trade the experience for anything. Those were some of the best days (and nights) I'd ever had. I could never have afforded that vehicle without financing it. My experience is a good one in that regard, and I have no problem financing something else.

I am currently looking at Gen II Vipers (wanted one on and off over the years). I'll probably pay for half of it in cash and finance the other half...I want the cash around. I have the freedom to pay outright, but just don't feel comfortable doing that in the current economy. My budget is $50k for the car. There are other uses for the rest of the money. I deny myself a lot of things I really want, I owe something to myself.

I just found out someone I work with has a potentially life-threatening medical issue. Young guy in his 40s with a wife and kid in college. I'm turning 40 in July. This is putting many things into perspective. Several of my friends have passed within the last 5 years - they all thought there'd be another tomorrow, too. I don't care if I pay 7%, 8%, 9%. So what? Screw it. If a 7% loan pushes me over the edge, then there's no hope for me anyway. Am I hurting myself? Doubtful.

Hell, if things get bad, I'll sell it. I know I won't be upside down, Gen IIs are nearing bottom anyway.

RMX

 

All,

Have to admit, Husker got me. He was kind enough to PM me with a clarification and some details of when he would “finance a Toy.” I would have to agree under the special parameters he set, I would (and did) finance “a necessity” I could have easily paid cash for, but I probably would still not finance “a Toy” this way. There is still a potential something could go wrong and being “a Toy” would add insult to injury (in my thinking). I’ll use myself as the example as posting any part of Husker’s PM to me would be bad form.

For this to make sense, you must assume (as I did) that the OP assumed that the potential future owner he was addressing did not have the funds to “just pay cash,” and HAD to finance “the Toy” with some small down payment if any, otherwise why the subject of the post? Obtaining the car would be an emotional success assuming no breakdowns, (but read the “Dream Turning into a Nightmare” thread); but it would also very likely be a financial “failure” no matter how reliable a purchase it turned out to be. The bottom line is that ownership under the OP’s scenario would likely result in a (serious) drain on the owner’s financial bottom-line, a lessening of “total necessary net worth.*” In my line of thinking, wholly and totally unacceptable. But let’s see how it M-I-G-H-T be acceptable.

My Story. My wife always had the newer, 100% reliable, car (don’t they all?). My old ‘84 VW Golf, on the other hand, contracted the dreaded VW charging problem. It would kill ANY battery after driving 35+ miles. EVERY time. Period. It would run all day once started, but shut it down and on the restart …… nothing; not even a “click.” Actually it was VERY reliable in that regard. S***s DieHard my a$$! They died quickly and v e r y easily every time. Five to 10 minute drives were no problem but any longer than that and I was taking my motational life in my hands. I replaced the batt so many times I lost count. I would ALWAYS have to park on a hill so I could “roll-start” the car. Three out of every 5 mornings I had to roll-start it. I lived with it for 3 years like that. That car was a humor mill extraordinaire. My co-workers gave me so much crap… (But today I OWN a Ferrari and they can/do not ). I gave VW 10+ chances over the years to fix it but they NEVER found the problem. As I said, once running, it ran like a raped ape. I would not hesitate to take it anywhere, and I did. Great car!!! I just had to very regularly check the gas and fill the oil. I am easy to please and it served my purposes well; getting me from Point A to B and back (with gravitational assistance, of course.) and it never let me down, not one time, once it was running.

Well along came 9-11 and a bit later my recall back to active duty. My new duty location (Heidelberg, GE) had no hills at all in the areas I lived and worked. So, I needed a new car (Read: Necessity). Finding people to “push-start” me every morning was just a little too much.

I had the $ to buy a new car outright for cash (Key Point #1), but I noticed VW was selling cars (VW Polo’s) with 2% APR financing (Key Point #2). WHOA!!!!! 2%?!??!? I was making MUCH more than that in the Markets (7%-15%) at the time (Key Point #3), so that was a No-Brainer. Finance away; I’ll assume that debt!! I was MAKING $$$$$ on this deal. Not a lot, but more than if I’d paid the car off in full immediately. I did watch the markets like a hawk and was ready to pay the loan off instantly if the earnings tide changed against me. In this case the tide did not change. I financed the car and pocketed a nice (tiny) chunk of change. My bottom-line INCREASED; I went from “poor” to “not as poor” over the life of the loan. Good stuff.

So, in this one single case I will reluctantly agree that financing “a Toy” could be an option. However, not so fast. I am not eating crow here. These are some very stringent stipulations. The potential loan seeker MUST met the following to have my (again, reluctant, after all it is “a Toy”) endorsement. But who gives a **** about obtaining my endorsement? As one of my best commanders once said “With eyes wide open.” The potential financing owner must look at all the angles before diving into ownership.” “What if,” must be your watch words.

If you are still reading, let’s review the non-negotiable stipulations; “Key Points 1-3:”

KP#1: I could have paid the car off at ANY time; I had the total cost of the car in cold, hard cash prior to purchase.

KP#2: The auto loan APR was RIDICULOUSLY LOW (2%).

KP#3: The cash I did not use to buy the car outright, was not used to make my MC and Visa payments (I had none) or buy (or likely finance) a bazillion inch plasma TV, but left invested in the Markets so as to MAKE ME MORE $$$$ than the loan payments cost me (7%-15% vs. 2%). My total net worth increased over the life of the loan. I became less likely to wind up on the receiving end of a soup kitchen line, not more likely.

So, in my line of thinking (yes, I am twisted), it is much more than just finding a lending institution and borrowing from Peter, Paul or yourself, as the OP seems to suggest to chase and capture a dream. It must be a full package deal. “Toys” are only bought with “Mad $$$.” They should never, ever, ever, be a drain against “necessary total net worth.”*

If you apply my twist to Huckster’s thoughts, and IT MAKES YOU MORE $$$, I guess you could come out OK via financing. But I’d still have to really bite my lower lip to finance “a Toy,” even under this scenario. That is just me. Now you know why I am not rich and probably never will be ….. principled perhaps, but not fully financially savvy.

* NOTE: “total necessary net worth” is the amount of money/assets needed to retire and maintain the desired lifestyle.

I hope this helps anyone looking to finance "a Toy" of any kind to see all the angles. Best of Luck!!

 

'nuff said

 

I do not really understand the people that do not believe in financing "toys." I would not advocate over-extending yourself or your credit, but if you are willing to pay more for something now and wait on other things that is a personal choice. One poster noted that some of his friends have passed already. Tommorrow is not a given for any of us. Saving for retirement,family, and housing are very important if you want to be well taken care of in your elder years. I see a lot of elder patients and many always tell me to go ahead and do whatever I want now, because if I wait for retirement I might not be physically able to enjoy it then. I applaud those of you who have figured out how to get your dreams, even if there are other naysayers! I am a car-aholic, Scott ;o)

 

I've never had a car payment. For me if I can't pay cash I can't afford it. If I can't afford what I want then I buy a beater save the money that I would be paying in payments, then I can buy what I want. I don't like debt. Plus to finance a depreciating asset to me is crazy. I always buy a car a couple of years old that have done most of their depreciation.
I think what mwr4440 doesn't really count as financing. If you have the cash and you use someone else's cash to buy something because their cash is cheap and your cash is making you better return. Then that's a no brainer. It doesn't really count as financing a car, it's smart business. I do that with my credit cards. When I get a zero interest card. I withdraw as much as I can for a year and put that money in a money market account or something.