NY Times article-Leasing Exotics

Exotics on the Easy Payment Plan

-edit A very interesting article. 400k down and 20k a month!!!

 

thats interesting... if i was so serious of a collector, i might just buy a house/property in a state where you have a limit on automotive sales tax or none at all

 

I found it very surprising that the article stated that about 1/2 of exotic car owners lease their car. That stat contradicts what many have said on this site; always pay cash for your toy.

 

Everyone has a right to spend thier money as they see fit. I don't agree with those who lease toys, but thats my opinion.
When the real implications of the current credit market crunch comes into the spotlight those who are leasing will wish they weren't.
If its a toy...write the check.

 

It says 1/4th of owners lease their cars.

 

Good read. I have a short attention span with my daily drivers, so I lease. In CA you only pay 'use tax' on each monthly payment, instead of 7.75% sales tax on the lump sum (ouch).

 

The 'always pay cash' should probably read 'always be able to pay cash' for your toy, and I think it's great advice more than a reflection of reality, where people borrow their way into a lifestyle they can't pay for.

 

A lessee is not an owner.

A lessee is a renter with perhaps an option to buy.

 

A correct observation that seems lost on almost everyone.

 

No contradiction. This is the key quote:

There's a difference between needing a lease because you don't otherwise have the cash to get the car and choosing a lease over cash because you think you have better use for the cash.

 

The actual numbers make a difference (cap/interest rate, period, etc) - but financing typically means you pay a larger downpayment, all the sales tax gets paid up front and you owe nothing at the end and own the car; while leasing typically has a lower downpayment, the sales tax gets paid only on the payments you make and there is a large payoff to buyout or else you return of the car at the end. So if you trade cars regularly you only pay partial sales tax on a lease, but if you expect to buy the car out, then you end up paying the same sales tax but spread out.

Also with financing you're losing the interest earnings from the downpayment being in their account versus your account, while with leasing you're paying them interest on a large remaining balance being carried every month (so hopefully keeping that downpayment in your account is letting you earn more than you're paying).

The large downpayment mentioned in the article for the Bugatti is unusual for lower end leases; this is probably because the leasing company didn't want to take on the risk of a rapidly depreciating car (even if the collectors think it will hold its value); for higher volume cars the residual value is more predictable and they are able to get you into a lease for a low initial amount.

 

There's a big, very meaningful difference between people who need to finance to afford a toy, and people who have no need to finance whatsoever but choose to to suit their own particular situation. It's not my toy (it's my daily driver), but I recently elected to finance a car purchase rather than write a check because I found a low rate, and I'd personally rather maintain my liquidity in situations where it's easy and cheap to do so. When markets are getting sloppy (as they are right now), corporations place a very high value on liquidity. I try to manage my personal finances in a similar fashion...

 

I have never leased a car BUT I may in the future for the business tax reasons. You may find that most of the people leasing exotics also own a business and therefore can take advantage of leasing and saving on taxes. You will also find that most will have the car in the business name as well.

 

My father always told me it was good to keep cheap debt and that cash in hand was more important. My family owns alot of gas stations in houston and I work in that business and with the rising prices of gas you never know when we're going to need an extra 300K bc of a .20 jump in the price of gas, we own multiple gas stations and an overnight jump of .20 times almost 30 stations and thats a total of close to 900,000 gallons of gas for all the stations, you do the math. I make a good deal of money, but I just enjoy making a simple payment of $1500/month on my S550 and another $1500/month of my sl55, of course I put down a good deal on both for 4 years, but there was no need for me to pony up $200k just bc they were TOYS. They're both at 6.5%, and with the cash I saved I recently bought a subway franchise that will make me money. Had I plunged $200K into 2 cars that wouldn't have been the case. Trust me cash in hand is the best, even if you have $3 million cash and you think you can spend $250K on a car trust me opportunities always arise and you'll kick yourself if you have to pass bc you have to sell your car first to get cash out to invest in a great opportunity, I learned the hard way 4 years ago when I couldn't get rid of my 355 in time to get a downpayment on a potential parking lot a family friend was building, Im losing out on around $20K/month now bc I couldnt sell the 355 for 7 months.