General question for the board - What percentage of F-Car owners finance their cars? As I search for a car, I have been a little surprised in the number of people that have notes on the cars. Assumed most if not all were paid for with cash. Is the distribution of those with loans and those without shaped like a dumbbell - a lot on both ends or is my small sample of owners too small to make an educated guess? Just curious. Thanks.
Just my opinion but I strongly believe that one shouldn't buy one of these cars unless they can afford to pay cash. In my opinion the only reason for financing would be for some potential tax benefit. Then again, it is just my opinion and worth what you are paying.
having the 200k to buy the car, does not eqaual its a better financial option to do so. as i previously said, i think most of owners are in the position to own a ferrari because they work for themselves and own biz instead of work 9-5 for someone. in that case they get write-off on the lease, so on newer cars it a good idea to do so. on older cars i would just buy it out.
I own my own business and pay cash - Leasing one on your business is a sure sign to get audited - especially a Ferrari - Monthly Lease payments rates are often (tho not always) lower than financing a car, thus more people can justify the lower cost of a lease - BUT, at the end of the term (generally) you return the car so you own nothing for those payments (as opposed to financing (but if the depreciation is stiff either financing or leasing can leave you upside down) - Still many choose the lease route because they only want to car for a few years and no hassle in having to sell it or trade it in. Of course, you milage may vary.
Chris, when I asked my accountant about leasing an exotic through the business, he just started laughing. One of the reasons I use this guy, besides the fact he is a dyed the wool car nut, is that he used to be an IRS auditor, so he knows what they look for and STRONGLY suggested not leasing anything with flash for your business unless your busiiness is racing or something specifially related.
If you have nothing to hide then there shouldn't be anything to worry about while being audited right?
Thanks guys. I was curious because the owners with cars to sell that I have talked to have bank notes not leases. They were all second or third owners - not the original.
Its not about whether you have anything to hide or not, (at least for this example) its about whether the irs auditor feels you can justify a 200k deduction on an exotic car as opposed to the standard 60 to 75K bmw or merc. According to my guy, leasing an exotic will red flag you every time(exceptions stated in last post). So maybe its about whether you get audited or not! But hey, just passing on one taxmans opinion.
Wood: For the record, I'm the president/CEO of my own company. I have over 500 employees and would never try to write off my Ferrari or other toys. Most of us do not use our toys as daily drivers and so it would be wrong to fabricate a false mileage statement. I may be strange but I consider my cars, (other than my daily driver), motorcycles and boats as toys. I even have one of my boats with my company name on it but would not try to write it off against the business. The only vehicle that is truly a business asset is my 1919 Model T that was used in the advertising for the past 40 years. However, it is fully depreciated (more than once). I don't "hide" anything at tax time. We take full advantage of every legal tax benefit but I wouldn't try to slide an exotic through unless I was in the business of exotics. All that said, I did mention that financing would be considered if there was a potential TAX benefit. For me, it is just better to own outright if possible. One financing option however for some folks would be use of a home equity line to purchase a car. At least the interest is tax deductible as mortgage interest. Not a bad way to go if someone doesn't have the ready cash or can arbitrage the money borrowed at such a low interest rate and purchase a higher yielding investment. >
Another alternative, is to have the company pay the lease or payments, and declare the amount paid as taxable income. This is still cheaper than paying all in after tax dollars, and by declaring the income the IRS is satisfied. My CPA is fine with this arrangement. However I have never used it for a Ferrari, but have for a Porsche and 2 Bentleys.
lease should always have a lower payment if terms are similar compared to finance. yes u have no car at end of lease, but the money u saved compared to a fanancing is prolly same as what you used financed car is worth.
i hear you. i have the company write out chks to pay the lease as expense pre-tax. and i have no fun biz on the tax return.
I too am self-employed, I own an insulation contracting business. I paid cash in full for my 355 spider...for me that is the ONLY way to do it. My theory is that if you can't afford to flat-out buy & OWN the car, then you simply can't afford the car! When you bring a lease company into the picture or finance the vehicle...all you're doing is bringing another party into the profit-making picture at your expense. Is an auto-manufacturer offering 0% financing???? Bet you have to forgo the big rebate: that's your additional cost! I've watched many of my friends leverage their asses into their BMW's, Mercedes & Lexus's...it's sooooo pathetically important to have these flagship name-brand cars and keep up with their friends. They also bought huge homes with huge/jumbo loans, they have a leased boat or RV and all sorts of various payements on credit cards and what-not. I call it "Flash", it looks like wealth and some of these saps think it's the way everyone operates.....but it's wrong: using most of your income to float payments & loans destoys the ability to save. If someone loses their job or a hitch in the money-flow should happen: disaster. Course, their disaster is often someone elses opportunity.... People often forget that a "write-off" is a term relating to "write off as an expense". With my business I can show labor, tools, materials and other BUSINESS-RELATED items as being part of my operations. I can even show my Hummer as being part of my work-truck, pulling a trailer, etc. But how the hell could I sit in front of an IRS audit agent and explain how my Ferrari is an integral part of my business???? So when you talk about "writing it off"....just consider yourself as saying "I'm gonna show this as a business expense". It never ceases to amaze me how much misunderstanding there is about this concept. About the only business that can show a Ferrari as an expense is an exotic car rental business or a business that uses the car for movies, tv, etc. Another gross misunderstanding is that leasing is better, or somehow there is a greater tax benefit to leasing. Ya know, every single bit of expense in owning & operating a business vehicle is expensed (written-off). In fact, when it comes time to sell the owned vehicle...many buyers are happy to show less paid on the paperwork and that spells a bigger expense for the former owner. Do the math. Then there's the person who says they can lease or loan the money at 5%, and then invest the otherwise-purchase-money in the stock market or some other investment and make 8, 10, 12 or evevn 15%. Uh, yeah....and I can double the money in Vegas! As I see it, people who can't afford to buy it in full, lease or loan it...then they rationalize it. Bull****: leasing = RENTING w/down-payment. A Ferrari is the cherry on top of the heap, it should be considered the most frivilous and least critical of things to own. It should come only after you are well into Real Estate & owning your home, having no credit-card payments at all, having a solid retirement plan somewhat funded, etc, etc. That said......do anything you can to own a Ferrari I know, I know....but my therapist says I'm making progress and I'm alomst ready to come off the meds!!
