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Classic car leasing business

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Johnny boy

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I've had this idea for quite a while.

Why are leases only for new cars?

When you lease a car, the vast majority of your payment is paying for the depreciation. Depreciation doesn't benefit the customer, nor the leasing company...so why is it done so much?

Manufacturers just want to move inventory.

Wouldn't it make more sense to lease something that depreciates less, or doesn't depreciate at all?

The customer would be paying for the utility and appeal of driving the vehicle, not the depreciation, leaving much more room for profit for the leasing company.

Which market would this work best in?

Classic cars.
Classic cars hardly depreciate. They are cool, unique, and have a huge appeal to many people, but they cannot buy them because they either don't have $25,000 cash to purchase one, or they don't have 30% to put down on financing terms.

Me and two business owner friends of mine have talked about the idea and we are going to move forward with it. We are going to purchase a late 60's Mustang for around $25,000, advertise it online for lease for a period of two to three years at around a $400 monthly payment, and get a solid proof of concept and sales before looking for any major funding. We are looking for a car similar to the one pictured below. We have found some good candidates that are restored and would be in good enough condition to lease out. This one went for $27,000. Imaging driving this thing for $400 a month for a few years. I know I would've signed up if someone advertised this to me!

1966-ford-mustang.jpg

1966-ford-mustang (1).jpg

1966-ford-mustang (2).jpg

Legality

1. We are NOT a dealership since we will not include a purchase option at the end of the lease. No title transfer = no required dealers license or dealer disclosures.

2. We have to provide proper leasing disclosures and documents, but are exempt from many other laws and regulations since this is not a "credit sale" as defined in the Truth in Lending Act.


Maintenance

1. The customer is responsible for maintenance and will be given recommending servicing documents so they can get the car properly maintained on a proper schedule.

2. The prices for classic car maintenance is cheap since parts are easily sourced for the cars we would be purchasing and anyone can work on them, not just a "technician" that works for the specific manufacturer.


Insurance

1. The customer is required to carry full insurance. You can get an agreed value policy for a daily driven classic car through some insurers and it is not prohibitively expensive at all.


Damage and neglect

1. The customer pays a security deposit, submits credit information, and is liable for excess damage just like any lease. They are forgiven for regular wear and tear.


Repossession

1. Since there is no transfer of title, there is little regulation as it relates to repossession, lowering costs, fees and red-tape associated with getting vehicles back for lack of payment


Mileage

1. Customer is limited to a number of miles or faces a per-mile fee.


Tracking

1.First customers will agree and consent to the vehicle being tracked (taking no chances for the first batch of cars).



The cars would be inspected, purchased, stored in a garage, advertised for lease online in the local area, and leased out for a period of 2-3 years.

A car worth about $25,000 would bring in about $14,000 in three years with almost NO overhead. Expenses would be a small fee for storage, the cost of the time required to structure a deal and bring the car to the customer, the business and property insurance to cover in the case of loss of vehicle that isn't covered by customer's insurance, etc. ,the cost of reconditioning the vehicle when the car is returned, and any repossession fees if a customer defaults on payments.

We are going to pool some money together for our first one. I would just do this myself in a year or two with my own money, but I've always toyed with the idea of partners that have business experience and it seems like a fun idea that we can scale and get some big funding for if our first deal works out well and we make enough financial presentations.
 

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Johnny boy

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Note: I know that you CAN get leases on used cars and classic cars, but it's not advertised, has a purchase option which makes it fundamentally different, and nobody knows about it. It's just not executed well and should be improved.
 

monfii

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From a customer perspective, I like the idea!

I understand the details of the contract you mentioned above, but I "disagree" with two of them:

Mileage

1. Customer is limited to a number of miles or faces a per-mile fee.


Tracking

1.First customers will agree and consent to the vehicle being tracked (taking no chances for the first batch of cars).

For 400$ a month I would want to drive my car as much as I want, and I absolutely don't want to be tracked. That may be a cultural difference though, maybe US customers won't mind?
 

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For 400$ a month I would want to drive my car as much as I want, and I absolutely don't want to be tracked. That may be a cultural difference though, maybe US customers won't mind?
Mileage limits are standard with car leases in the US, tracking isn't but it is a bit different in this situation since he is not offering a purchase at the end of the lease.

Tracking is standard at buy here pay here dealerships though, so the concept is very normal here although not popular. But it is protection for the company that the customer is not going to run off with the car since the customer does not own it after all.
 

Empires

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Love the idea, I think this would definitely appeal to a lot of people. I would definitely be interested if this got advertised to me.
 

Johnny boy

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From a customer perspective, I like the idea!

I understand the details of the contract you mentioned above, but I "disagree" with two of them:



For 400$ a month I would want to drive my car as much as I want, and I absolutely don't want to be tracked. That may be a cultural difference though, maybe US customers won't mind?
the tracking would only be for the first few deals to add another layer of protection for us.

The mileage would be something like 10-12k a year, very typical for a daily driven car. It's just to protect it from being driven across the country 15 times and we have to replace the engine. Maybe we could offer an unlimited mileage lease for an extra $60 a month or something.
 

BrianLateStart

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For me a classic car is something you enjoy maintaining and caring for. That's half the experience. You drive it on nice days and on weekends. I don't think I'd have that kind of appreciation for a car that's not mine and never going to be mine.

If it's to be daily driven, it doesn't have the modern conveniences and safety features that new cars have. Bluetooth, hands free calling, turn by turn directions, traffic updates, more then one cigarette lighter port, etc. Unless you're going to update some of the equipment.

I could see myself renting a classic car for a weekend, maybe a week if I'm in an area that I'm familiar with and don't need maps with directions.
 

Johnny boy

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For me a classic car is something you enjoy maintaining and caring for. That's half the experience. You drive it on nice days and on weekends. I don't think I'd have that kind of appreciation for a car that's not mine and never going to be mine.

If it's to be daily driven, it doesn't have the modern conveniences and safety features that new cars have. Bluetooth, hands free calling, turn by turn directions, traffic updates, more then one cigarette lighter port, etc. Unless you're going to update some of the equipment.

I could see myself renting a classic car for a weekend, maybe a week if I'm in an area that I'm familiar with and don't need maps with directions.
Nice! Yes that’s how lots of people see it. Fortunately there’s lots of people interested in having the car for 3 years too.
 

Johnny boy

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Me and my partner have filed incorporating docs and have found a few interested investors to pay for the first cars. We are drafting up leasing docs and ironing out all the details and outlining procedures.

I could be an automotive finance lawyer in the state of washington after all of this reading.
 

Carlitos

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Forgot to mentioned there is a very similar business model but for JDM. I can see this working, especially if you build a nice fleet of popular muscle cars. There's a lot of muscle cars projects out there being sold for cheap in order to restore. But I think you want to get them ready to be leased, without having to deal with the restoration process.
 

Johnny boy

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Forgot to mentioned there is a very similar business model but for JDM. I can see this working, especially if you build a nice fleet of popular muscle cars. There's a lot of muscle cars projects out there being sold for cheap in order to restore. But I think you want to get them ready to be leased, without having to deal with the restoration process.
yes we would purchase ones that are not collectible, have a huge cool factor to them, and would net the largest percentage return. For example you could lease out a 67 mustang for 400 a month and pay 25k for the car. Great returns. But good luck buying a split window corvette and getting the same return. It would cost you over 100 grand, so for the same return you would have to charge 1600 a month. That would be tougher. So to start we will be acquiring mustangs for around 25k in great, restored condition. Sort of like the one pictured above.

Do you have a link for the JDM company? I can't find it anywhere.

We would NOT be restoring these cars. At most we would recondition them once we get them back after the lease is over, and would be using the customers security deposit to cover damages and then having them pay for the rest, according to their lease agreement.

At scale we would operate like carvana. You login, see the selection, do everything digitally, get your car delivered, return it and pay for the shipping if you dont like it or want to swap it out, make payments monthly and after 3 years we get the car back. It could be scaled up very large with enough funding. What's nice is that the company would be accumulating huge assets in the process and could possibly corner the market on certain types of vehicles.
 

Carlitos

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yes we would purchase ones that are not collectible, have a huge cool factor to them, and would net the largest percentage return. For example you could lease out a 67 mustang for 400 a month and pay 25k for the car. Great returns. But good luck buying a split window corvette and getting the same return. It would cost you over 100 grand, so for the same return you would have to charge 1600 a month. That would be tougher. So to start we will be acquiring mustangs for around 25k in great, restored condition. Sort of like the one pictured above.

Do you have a link for the JDM company? I can't find it anywhere.

We would NOT be restoring these cars. At most we would recondition them once we get them back after the lease is over, and would be using the customers security deposit to cover damages and then having them pay for the rest, according to their lease agreement.

At scale we would operate like carvana. You login, see the selection, do everything digitally, get your car delivered, return it and pay for the shipping if you dont like it or want to swap it out, make payments monthly and after 3 years we get the car back. It could be scaled up very large with enough funding. What's nice is that the company would be accumulating huge assets in the process and could possibly corner the market on certain types of vehicles.
A few years back I rented an old classic Rolls Royce for my parents wedding, I believe I paid $600 for 2-4 hours. It was a really nice car, definitely a neck braker lol Usually for wedding people get the usual limo, but I wanted something different and very special, due to my parents being together for over 30 years and never got married until recently. This happen 6-8 years ago.


I came across the JDM company on Tick Tock, will look it up and post the account name here when I find it.

Whether is a very collectible car or not, I can see this working depending on future regulations with gas vehicles. California and Boston plan on banning gas vehicles in their state by 2030 I believe. We are heading toward more EV cars, a lot of cars will soon become very rare and extremely valuable. I personally have a 00 Civic coupe not the Si version but an EX same Sh*t lol But even my car has gone up in value, and more parts are becoming hard to find. I'm the second owner of my car, and everything is stock with the vin number on it.
 

Johnny boy

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Whether is a very collectible car or not, I can see this working depending on future regulations with gas vehicles. California and Boston plan on banning gas vehicles in their state by 2030 I believe.
Maybe "the production of new gas vehicles" but definitely not banning gas vehicles themselves. Not happening. And if that eventually does happen in 40 years, you just pivot.

Eventually this idea is for leasing things long term that do not depreciate in order to maximize profit in a passive, scalable way. It could be used cars or anything else for that matter. The idea is that classic cars are going to be the best vertical to dominate first. Just like amazon choosing to go after books first. The big picture is that you should be able to go on your phone, find stuff that you want, lease it for a period of 1-3 years, give it back, repeat.

It could become the owner of subsidiaries that do the same thing just for different markets. You could have one that deals with vehicles. You could have another company that uses the same model and same systems that deals with boats. Same for used RV's or dirtbikes. Anything where it won't depreciate much (buy used) and a used model can be very enjoyable, people would want to use it for longer than just a day or week for a rental. And you can charge enough to make a very profitable passive return. It would provide massive value for both parties since you're getting 16-20% returns (in a way that's more passive than most other investments. They cover maintenance and repairs) It provides value for the customer because you get the perfect length of time to use something (a year or so) and you just throw the year's cost into payments. Short term rental companies have to charge so much because of the infrastructure requires to handle constant traffic of many people coming in and out. It's like hosting an AirBnb vs renting out a home for a year. Why can't you do the same with other stuff? People don't really want to buy things. They want to use them. I wouldn't mind riding a dual sport motorcycle for a year for $150 a month. I could head up into the trails here in washington, or throw it in a trailer and go hit the dunes with it. Maybe I want a boat to use at my lake house but I don't know if I want it for 10 years. I don't want to tie up 25 grand that I could use for my business right now. This year, I got a ski pass for the first time. I didn't want to commit and buy some nice skis so I paid $180 and got season-long take home rentals. Best thing ever. I get to use them for the season and keep them, take them back in the spring, and that's it. They're happy too because they never have to talk to me until it's time to take them back.
 

steve schweitzer

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Hello, I am somewhat new here as far as contributing but have been a member for a long time.

I am a professional in the classic car restoration and repair business (I own a restoration shop and restore high end musclecars on a daily basis and have 40 years experience in the field).

The factor you are neglecting to consider is that the VAST MAJORITY of so called "restored" classic cars are really painted shiny worn out junk. Basically every car sold at these major auctions and ALL vintage car dealers, will need thousands (if not LOTS more) to even make roadworthy.

I can pretty much assure you that 25K "restored" mustang you were discussing will need thousands to make reliable as there is no possible way you can restore the car for even close to 25K (it would be more like 60K - 125K at a professional shop).

Also please keep in mind these 50+ year old cars were NEVER designed to be anywhere close to as reliable as modern cars and pretty much broke down on a regular basis when they were only a couple years old.
The build quality was pretty much non-existent back in the day.

The ONLY way I can see this working is if you have a professional master vintage car mechanic on staff, or have a shop you can use with one, to fix all the little (and big) things that you most certainly will find with almost ALL of the "so called" restored cars out there.

A regular auto tech will be clueless on repairing these old cars as it is a completely different game than late model cars.

You will need to make sure the fuel and brake systems are completely gone through as most I see on these "restored" cars are completely unsafe.

What about the 50 year old wiring that can cause the car to burn up if it was not replaced? This is almost never replaced unless the cars go through a REAL restoration, not one you would find on a 25K "restored" car.

I see these things on a daily basis and it is a real shock to people that buy their dream car and then find out it needs another 20 - 30K to mechanically restore the shiny car they just bought.

Just as an example, a local customer just bought a really pretty red 1967 Dodge Coronet R/T from a vintage car dealer. He brought the car in to us to get the heater working and reinstall the ac components. I asked his goals for the car and was told he wanted a nice cruiser for him and his family to drive to cruise nights and show. With that said he had me inspect the car completely.

What I found was a shiny, worn out, unprofessionally repaired (half assed, unsafe work), unroadworthy car.
The completely original 54 year old heater system needed restored (3000), A/C system rebuild ( 1500), rear axle bearings junk and differential seals leaking (600), all shifter linkage half assed and basically unsafe (500), carburetors with hand built linkage just ready to hang wide open the first time it was full throttled (500). And the most pressing issue is the under dash wiring harness was burnt up and patched in several places (2000).
The engine had multiple leaks (1500) and the front suspension, steering linkage and steering gearbox are all completely worn out (2500). Hand built brake lines that were rubbing the steering (500).
He was told by the dealer that this car had been RESTORED and was ready to drive.
After spending about 10K (this go around, there is still lots more small things needing corrected) he now has his nice cruiser. This is over and above the 20K he spent to but the car.

What happens when you lease a "restored" car to a client and it catches fire in his garage burning his house down? This happened to another customer or ours a few years ago.

Just some food for thought.

Thanks, Steve
 

Johnny boy

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Hello, I am somewhat new here as far as contributing but have been a member for a long time.

I am a professional in the classic car restoration and repair business (I own a restoration shop and restore high end musclecars on a daily basis and have 40 years experience in the field).

The factor you are neglecting to consider is that the VAST MAJORITY of so called "restored" classic cars are really painted shiny worn out junk. Basically every car sold at these major auctions and ALL vintage car dealers, will need thousands (if not LOTS more) to even make roadworthy.

I can pretty much assure you that 25K "restored" mustang you were discussing will need thousands to make reliable as there is no possible way you can restore the car for even close to 25K (it would be more like 60K - 125K at a professional shop).

Also please keep in mind these 50+ year old cars were NEVER designed to be anywhere close to as reliable as modern cars and pretty much broke down on a regular basis when they were only a couple years old.
The build quality was pretty much non-existent back in the day.

The ONLY way I can see this working is if you have a professional master vintage car mechanic on staff, or have a shop you can use with one, to fix all the little (and big) things that you most certainly will find with almost ALL of the "so called" restored cars out there.

A regular auto tech will be clueless on repairing these old cars as it is a completely different game than late model cars.

You will need to make sure the fuel and brake systems are completely gone through as most I see on these "restored" cars are completely unsafe.

What about the 50 year old wiring that can cause the car to burn up if it was not replaced? This is almost never replaced unless the cars go through a REAL restoration, not one you would find on a 25K "restored" car.

I see these things on a daily basis and it is a real shock to people that buy their dream car and then find out it needs another 20 - 30K to mechanically restore the shiny car they just bought.

Just as an example, a local customer just bought a really pretty red 1967 Dodge Coronet R/T from a vintage car dealer. He brought the car in to us to get the heater working and reinstall the ac components. I asked his goals for the car and was told he wanted a nice cruiser for him and his family to drive to cruise nights and show. With that said he had me inspect the car completely.

What I found was a shiny, worn out, unprofessionally repaired (half assed, unsafe work), unroadworthy car.
The completely original 54 year old heater system needed restored (3000), A/C system rebuild ( 1500), rear axle bearings junk and differential seals leaking (600), all shifter linkage half assed and basically unsafe (500), carburetors with hand built linkage just ready to hang wide open the first time it was full throttled (500). And the most pressing issue is the under dash wiring harness was burnt up and patched in several places (2000).
The engine had multiple leaks (1500) and the front suspension, steering linkage and steering gearbox are all completely worn out (2500). Hand built brake lines that were rubbing the steering (500).
He was told by the dealer that this car had been RESTORED and was ready to drive.
After spending about 10K (this go around, there is still lots more small things needing corrected) he now has his nice cruiser. This is over and above the 20K he spent to but the car.

What happens when you lease a "restored" car to a client and it catches fire in his garage burning his house down? This happened to another customer or ours a few years ago.

Just some food for thought.

Thanks, Steve
To address some of your concerns and questions

We are not restoring these cars ourselves. There are actually plenty of roadworthy vehicles with new wiring and redone parts that are in our price range. Although these vehicles will have imperfections and are not frame-off restored like I’m sure your company has done (and gotten top dollar for).

When we purchase a car, it goes through a third party safety inspection to verify that it is road worthy. We buy the car, have the safety inspection in hand, and then lease it out. That is to the extent of our duty from a liability standpoint. Leasing/rental companies do not have much liability in case of an accident (note: The Graves amendment to the federal highway bill. 2005) + we will have the proper insurance for accidents such as the one described.

The customer can take their car during the lease period to a number of recommended auto shops for repairs and maintenance, given that many people can work on older cars. They don’t need a “Ford certified technician” for anything and parts are cheaper for the vehicles we are purchasing.

The fundamental disagreement is that you can’t get a nice classic car such as a 67 mustang in good running condition for anywhere near 25k. I guess we will just have to agree to disagree and do it anyways.

I appreciate the response and your expertise on the subject.

Even assuming you are completely right and a properly restored car will cost you more (one that’s worth 50 thousand), then you would still likely have success leasing it out at a higher rate, since nowhere else could you drive a 50 thousand dollar classic car for anything less than $1200 a month.
 

Johnny boy

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I guess that’s why we are starting with one car to show proof of concept! Because then there won’t be anything to argue about, just financial statements and a track record.
 

PapaGang

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Hello, I am somewhat new here as far as contributing but have been a member for a long time.

I am a professional in the classic car restoration and repair business (I own a restoration shop and restore high end musclecars on a daily basis and have 40 years experience in the field).

The factor you are neglecting to consider is that the VAST MAJORITY of so called "restored" classic cars are really painted shiny worn out junk. Basically every car sold at these major auctions and ALL vintage car dealers, will need thousands (if not LOTS more) to even make roadworthy.

I can pretty much assure you that 25K "restored" mustang you were discussing will need thousands to make reliable as there is no possible way you can restore the car for even close to 25K (it would be more like 60K - 125K at a professional shop).

Also please keep in mind these 50+ year old cars were NEVER designed to be anywhere close to as reliable as modern cars and pretty much broke down on a regular basis when they were only a couple years old.
The build quality was pretty much non-existent back in the day.

The ONLY way I can see this working is if you have a professional master vintage car mechanic on staff, or have a shop you can use with one, to fix all the little (and big) things that you most certainly will find with almost ALL of the "so called" restored cars out there.

A regular auto tech will be clueless on repairing these old cars as it is a completely different game than late model cars.

You will need to make sure the fuel and brake systems are completely gone through as most I see on these "restored" cars are completely unsafe.

What about the 50 year old wiring that can cause the car to burn up if it was not replaced? This is almost never replaced unless the cars go through a REAL restoration, not one you would find on a 25K "restored" car.

I see these things on a daily basis and it is a real shock to people that buy their dream car and then find out it needs another 20 - 30K to mechanically restore the shiny car they just bought.

Just as an example, a local customer just bought a really pretty red 1967 Dodge Coronet R/T from a vintage car dealer. He brought the car in to us to get the heater working and reinstall the ac components. I asked his goals for the car and was told he wanted a nice cruiser for him and his family to drive to cruise nights and show. With that said he had me inspect the car completely.

What I found was a shiny, worn out, unprofessionally repaired (half assed, unsafe work), unroadworthy car.
The completely original 54 year old heater system needed restored (3000), A/C system rebuild ( 1500), rear axle bearings junk and differential seals leaking (600), all shifter linkage half assed and basically unsafe (500), carburetors with hand built linkage just ready to hang wide open the first time it was full throttled (500). And the most pressing issue is the under dash wiring harness was burnt up and patched in several places (2000).
The engine had multiple leaks (1500) and the front suspension, steering linkage and steering gearbox are all completely worn out (2500). Hand built brake lines that were rubbing the steering (500).
He was told by the dealer that this car had been RESTORED and was ready to drive.
After spending about 10K (this go around, there is still lots more small things needing corrected) he now has his nice cruiser. This is over and above the 20K he spent to but the car.

What happens when you lease a "restored" car to a client and it catches fire in his garage burning his house down? This happened to another customer or ours a few years ago.

Just some food for thought.

Thanks, Steve
Yeah Steve, you brought up a lot of points I was going to bring up. The first time someone dumps the wrong trans fluid in there will be some serious issues. If a leasing company can mitigate the risk associated with older car maintenance (and there is a lot of it, most people don't remember that anything domestically manufactured before the late 90s probably has a life of 100k before a lot of things wear out) and can find a good supply chain for classic parts, then it has a chance of success.

I love the idea, but the maintenance and conditioning during and after the lease is the hidden expense that could derail things. But it's a great idea. Let me know when you start renting Porsche 930s.
 

steve schweitzer

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To address some of your concerns and questions

We are not restoring these cars ourselves. There are actually plenty of roadworthy vehicles with new wiring and redone parts that are in our price range. Although these vehicles will have imperfections and are not frame-off restored like I’m sure your company has done (and gotten top dollar for).

When we purchase a car, it goes through a third party safety inspection to verify that it is road worthy. We buy the car, have the safety inspection in hand, and then lease it out. That is to the extent of our duty from a liability standpoint. Leasing/rental companies do not have much liability in case of an accident (note: The Graves amendment to the federal highway bill. 2005) + we will have the proper insurance for accidents such as the one described.

The customer can take their car during the lease period to a number of recommended auto shops for repairs and maintenance, given that many people can work on older cars. They don’t need a “Ford certified technician” for anything and parts are cheaper for the vehicles we are purchasing.

The fundamental disagreement is that you can’t get a nice classic car such as a 67 mustang in good running condition for anywhere near 25k. I guess we will just have to agree to disagree and do it anyways.

I appreciate the response and your expertise on the subject.

Even assuming you are completely right and a properly restored car will cost you more (one that’s worth 50 thousand), then you would still likely have success leasing it out at a higher rate, since nowhere else could you drive a 50 thousand dollar classic car for anything less than $1200 a month.
Thank you for the reply and good luck with your business.
 

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