The "Business End" of Ferrari ownership

Search this, we've covered these topics before. But here is the executive summary:

1. A Ferrari as a business expense is almost always a red flag for an audit.

2. These are just cars, not investments. Enjoy them for what they are, not what they could be worth in 5 years.

Welcome to Fchat.

 

Not a chance of the driver 328s reaching near those numbers in 5 years. Even the zero-mile 1989s rarely break $70K, and those are rare, rare sales. In truth, those aren't really cars, but more of a 1:1 scale model. Eventually given enough time and inflation these static pieces may approach that price, but you're better off investing in something else.

The 328 was built in relatively high numbers for a Ferrari, and so the supply isn't constrained. These are used cars, and regularly used examples will continue to depreciate as mileage and wear accumulate. The 328 has always been popular as a gateway Ferrari, but as prices drop on newer cars such as the 355s, the demand may drop.

The postitive side is that the depreciation rate on the cars is very low, so you're not throwing money away on that the same way you would on, say, a 2005 350Z.

 

The 246 Dino is 10-15 years older than the 328, was made in significantly less numbers, and has already reached its status as both a classic car and a desireable Ferrari of historic significance, yet prices are well under $100K. I don't think these cars are ever going to see significant appreciation, largely because of (relatively) high volume of production. If you want one, you can always find one or more for sale somewhere, so it's always a buyer's market. The desireable cars will appreciate some slowly, much like the Dino as a trendsetter, I think even if they are driven "reasonably." The big dollar six-to-eight figure Ferraris are now vintage cars made originally only in the 10's or 100's, so today they are very rare, rarely come up for sale except at high profile auctions, and therefore command the price of a seller's market. For example, the seemingly immortal 275 GTB which easily commands six figures today was at the time considered a "production car" by the Ferrari factory, and they made 784 examples over four years! This was a high volume Ferrari at the time, but by today's Ferrari production numbers that would be comparable to the ultra rare modern "exotic" Ferraris like 288 GTO, F40, F50, and Enzo (which by the way have also demonstrated appreciation in value due to their low production numbers). Once production of a model is in the thousands, it is unlikely to ever be an investment.

... unless you have another Ferrari bubble and everything labeled Ferrari suddenly comes in hot demand by the general public. I actually think there will be another Ferrari bubble one day, once people get over muscle cars. Sure Enzo is already dead, but what about Pininfarina? And you don't really need someone to die to have a bubble. It can generate on its own for no good reason. When that happens, the clearly logical thing to do is sell the Ferrari and buy the classic Vette or Mustang on the cheap until it blows over.

 

You don't want "Ferrari" to be on your tax return. Not as a hobby. Not as a business. It just screams "Audit me harder than Leona Helmsley."

Yeah, if you legitimately use your Ferrari to advertise your business, you could probably make a case for a deduction...but why put yourself through a guaranteed tax audit to get 30% off of your Ferrari maintenance??

If you want to be a legitimate car dealer, then yeah, you can probably find a legal way to use corporate cash to purchase whatever car you may happen to be driving, Ferrari or otherwise...but why take on a new, unknown to you business separate from your existing one?! That just broadcasts a cry that you are going to be taking your eye off of one business or another.

Jumping into a new market (to you) in the hopes of outsmarting the investors who live and breath in that market every day is generally a bad idea. Yes, there are collectors, traders, and car dealers who can make money selling Ferraris. It's **possible** that you could make money doing that, too. But unlikely.

Ferrari's are depreciating luxury goods. With rare exception, they are for people who can afford to pay cash for their car, pay for professional mechanics to handle all serious maintenance, and be disposed of when done via one avenue or another.

What you *don't* want to do is make yourself car-poor at the expense of your business. Over-spending is the number one cause of business failures. Controlling your cash burn rate separates the inevitable winners from the eventual losers.

The purchase price of a Ferrari is only a beginning. It's not a Honda. You can't get away with not maintaining it. This costs money even if you are able to do all of the work yourself. Insurance costs money. Property taxes on Ferrari's is also expensive, and the odds are that you'll lose money again when you go to sell her.

Buy a Ferrari when you have disposable "mad money" that you don't need for your 401k, IRA, savings pad, or business...not when an unexpected $5,000 car maintenance bill would be the difference in your business surviving another month or not.

If you want a tax write-off for your business, then you might be able to re-locate your corporate headquarters to the Bahamas/Caribean in a tax-free nation. You can still have a corporate branch in whatever U.S. city you prefer to live in, too...lettting your business build up tax free money there by cutting what your company pays yourself (or perhaps have two firms and pay your offshore company consulting fees for their work, an ordinarily legitimate tax deduction for your U.S. company)...anything but trying to tell your local IRS auditor that you want to deduct the purchase price and maintenance of your Ferrari as a "business" expense.

 

Uncle Sam will pay about $.40 a mile for business mileage this year. Just buy the car of choice and claim the miles. If you drive 30K business miles a year, thats about a $12K write-off which if you are in a 35% tax bracket, you will get $4200 of it back. Times ten years of this, you will just about pay for the car!

 

30,000 miles per year in a Ferrari! Wow!

That's one Major Service ($4,000 to $6,000) and one Minor Service (15k miles) per year.

He'd deserve a medal, not a tax break!

 

I think you could go two years between major services if you were driving a Ferrari 600 miles / week. I like the idea of making mileage reimbursement a worthwhile expense for a Ferrari. My accountant says just forget about deducting the car as a business expense, especially because I have other cars.
I think the 328 is already appreciating, but I do not see it going past about $70k in the next five years (for a car that would cost you around $50k in today's market.)
My $.02.
BT

 

Folks see the Charity use of my two cars, and I'm sure it's seen as a Tax Dodge.

It's actually just about supporting the Charity.....LOL!

Agree totally with mileage deduction only, as the main benefit. Do not forget MANY insurance policies will insure your car as "Pleasure ONLY, not for work", so make sure you are flanged up there!

Let's just say I have some imagination, as to how to spend my Boss's Car Allowance....

Now if he'd just buy my new ANSAs as "Italian conduit/tubing", I'd be set!

 

Anyone ever created a leasing company, then as an individual leased the car from it ?

 

My first Ferrari was the flagship of my Child Advocates kart racing team, all the pics were lost, from here...... we raised $68,000.00 USD to fight child abuse here in Houston, Texas. Didn't totally fix the problem.........*big sigh*

It kind of ended after 9/11, even my neighbor at AJ Foyt Racing had a tough time beating sponsor money out of the woods.

I'm very proud of my efforts, though. They invited us to run as a support class of the Texaco Grand Prix of Houston. That was fun! (two Pole Positions, one win in '98.......it wasn't as big of a party once they had to guard 20,000 gallons of racing fuel using High School kids with rifles, though.)...... I'd have been scared, but Mario Andretti was there as well, so WTF!!

The later I gave it to my daughter who made it The World's Fastest Art Car, benefiting the Orange Show Foundation.......we had great fun, made Cavallino #133, and met Buddy Guy, he sign a Stratocaster for my son.......with polka dots, you know....

I think if you google "Ferrari Art Car Houston" you'll find the latest pics from this year's Art Car Ball. Lady Valeria got her Cartier ring and was MOST pleased......The Orange Show is all about art and young kids, we tour schools. We swapped the blue car for the yellow one this year.....not everybody got it........

So that's about it, well FFQC speaks for itself...........pics of that somewhere....

 

Oh yea, I was on display once at the Rice University Gallery Art Museum, they let me drive on the sidewalk, and EVERYTHING! LOL!

You see I'm easily amused!!!!!

It would have been better, if the Volvo sedan, covered in singing fishes wasn't there though.......If you've heard Madonna, doing Eva Peron, doing "Don't cry for me, Argentina"...as performed by 200 singing Billy Bass, it loses it's luster after about the sixteenth time...............

 

Nice to have another CT F-Car owner who will be on the site. Glastonbery is not so far that you may want to join the NY tri-state crew for a run or two.
Also congrats on making it in the private sector. I went out on my own 27-years ago and never looked back. Always had a car in the business, and my first few sports cars (P924, Vette, BMW325, P968) were on the books and since they were daily drivers actually used in part for business use, I took the legitimate deductions. However, I now keep the "toys" (P-911C4; F-348 Spider) off the books.

 

I think SlickMurphy is up there, too.........He got his car (308GTB), then kindof quieted down.......

Do a search, you'll find him.......

 

Very well said.