Exotic cars: Buy outright vs. Finance. What would you do?

[CEBenz]

Ok, so I'm gearhead. I'm the first to admit it. I have a Jeep built as a rock crawler and a little beater econobox as a daily driver. I love my fast cars, 4x4 trucks, and especially Jeeps (the kind without tops and doors as long as the weather is warm). Maybe it's cause I grew up as the son of an old school street rodder (where they built their shit rather than paying someone else to do it), who knows. At any rate, one of my goals has always been to buy a Lamborghini. At some point, an Aventador would be awesome but that is a ways off. With that in mind though, I'd really like an LP640 Murcielago. Ever since getting to drive a 2006 a couple years ago, it's been even more firmly etched on my brain than it was when I was 5, and told my dad I was going to buy one when I grew up (ok, so back then it was a Countach but whatever).

So my brother and I were talking the other day. He already has a BMW M3 and a Volkswagen R32. He has been wanting an Aston Martin Vanquish S and there's me wanting the Lambo. We sort of disagree. He has everything paid for. I maintain that it doesn't make any sense to pay for an exotic car outright but rather, make the down payment and finance it while continuing to roll the difference over in the business. It seemed to me that the gain from rolling the difference over in the business would significantly outweigh the benefits of paying outright, especially with current interest rates.

I should probably point out, I don't have a desire to have a big house. Just a little acreage and really don't have many responsibilities in life.

So what do you guys think?

 

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[RBefort]

I don't have expertise or anything in this area, but I couldn't imagine a 500k outlay for a car that you may/may not keep for awhile to be a good purchase. I'd rather put enough down to stay ahead of depreciation over the years and be able to sell for even/more than loan amount. I bought an 07 z06 a few years back, financed 47k or so and put 15k down...when i sold it 2 years later, i owed 32k and sold for 38k (which was a steal). For a way bigger purchase, I don't think spending 500k to save spending 2k a month on payments/interest would be helpful. Having things financed, however, isn't really a great use of money either, but hey I just see myself being able to afford 2k/month in payments, rather than throwing out 500k of my net worth on a car, assuming I have a couple mill worth.

 

[wade1mil]

If I'm buying an exotic car, I'm paying cash. The only exception being How to Buy a Ferrari for $20k | Forever Jobless

 

[RBefort]

If you're paying cash, how much of your networth do you spend on a vehicle of your dreams? We are talking about 300-500k cards here. I guess we spend 50% of our incomes now on vehicles, so maybe it isn't so bad haha.

 

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[Vigilante]

I don't finance cars. I don't do debt. I don't owe anyone anything (other than a mortgage on some land.)

 

[nextgen]

debt free and will always be debt free. WHy finance something and pay interest on something when you can just buy it outright. You may have to wait longer but its alot better.

 

[CEBenz]

If I'm buying an exotic car, I'm paying cash. The only exception being How to Buy a Ferrari for $20k | Forever Jobless

That was a classic post and, as I recall, it had a thread here on the forum to.

 

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[Barry]

I think somewhere in the book says you can't afford it if you can't pay cash and your lifestyle doesn't change

 

[Vigilante]

I want a Bentley stretch with a driver.

I drive a Ford F350.

When you see me in the Bentley, you will know I paid cash for it.

 

[CEBenz]

I want a Bentley stretch with a driver.

I think I'd get motion sick. Lol

 

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[Barry]

One of my "Whys" read like this "I Want to buy a Maybach 62s, Paid Off With Cash"

 

[Jake]

debt free and will always be debt free. WHy finance something and pay interest on something when you can just buy it outright. You may have to wait longer but its alot better.

Time value of money.

 

[100k]

Wealth building 101, you do not buy goods that depreciate in value. Like M.J said, "If you have to think about how you can afford the car, then you can't afford it!" End of.

When you can go to the car dealer and pay the asking price in cash without a 2nd thought (like you would a can of soda or bubble gum) then you can afford to buy those things.

But, I think right now it would be wiser for you to hold out on the purchase a little longer, you could use the money to expand your business instead.

That's just what I think any ways. Live and let live.

 

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[Vigilante]

I just don't want to owe anyone money.

For the most part, while I realize there is merit to the theory of using the money for other investments, I think that's a mind game. I don't think that's the reason why 99% of people finance vehicles.

You can tell yourself that's a smarter path... and then you owe someone money.

What if you finance a $60k car, take $60k and invest it, and then turn it into $40K because the investment went bad? How did that help the car transaction? Now you still have the car loan, and $20k less principle.

Cash.

To each his own. I don't want to owe anybody anything. I've been on the downside of $2k per month car payments in a down economy. Never again.

 

[Barry]

I don't think that's the reason why 99% of people finance vehicles.

What I think is that people finance cars they can't purchase out right because they will never have all that money in cash live at once.....So they look for simply ways to afford it. It all comes down to instant gratification say I make $1000 per month and a Mercedes is selling for $12000 but financing is available for say $200 per month. Instead of waiting maybe a year and half to purchase for 12k They finance it to get it NOW (Instant Gratification) Instead of delaying

 

[Vigilante]

What I think is that people finance cars they can't purchase out right because they will never have all that money in cash live at once.....So they look for simply ways to afford it. It all comes down to instant gratification say I make $1000 per month and a Mercedes is selling for $12000 but financing is available for say $200 per month. Instead of waiting maybe a year and half to purchase for 12k They finance it to get it NOW (Instant Gratification) Instead of delaying

Most of the time... but you can rationalize it as a smart decision because you can take the rest of what ever you have available and invest it. Rarely happens though. At least for me, I just spent it elsewhere. We just raise our standard of living (short term) and life becomes a game of monthly payments vs. equity.

 

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[Barry]

We just raise our standard of living (short term) and life becomes a game of monthly payments vs. equity.

True words friend. And yes it can be justified as it is said that as soon as the car leaves the lot it depreciates, But I think really rich people don't think about this because they CAN do this.

Where as mediocre would start thinking about future choices as MJ would say prices become inconsequential If he want's it he just goes and buy it, No need to even begin to think about it,this is real wealth.

I watched an interview on Forbes awhile back when Larry Ellison bought the Island and Forbes said the 500 million dollar purchase was equivalent to a mid income family buying a Chevy Tahoe

The more you have the less you worry maybe?

 

[biophase]

That was a classic post and, as I recall, it had a thread here on the forum to.

Yes, that was a thread that I started. Here are my thoughts after paying cash for my Ferrari.

1) If you had $100k, you can put it all towards a new business and finance the full car price of $100k. If your business goes well, then you should definitely be making a better return than the interest on your financing. However, if the business goes belly up you are out your $100k and end up upside down on your car. So the caveat to do it this way is that you need to have more than $100k and it also has to be throw away money. Losing the $100k can't affect you. If it will, you shouldn't be buying the car in the first place.

2) People say, well if you have all this cash and can leverage it massively by building a business, why not finance it and everything in your life? Well at some point you will feel like spending your cash and reducing your debt. If I have $1m in the bank and want to spend $100k on a car. Why not just spend it? Maybe I don't want to buy another business for $100k just to finance the car. I may not have the time or even want to run another business. One day, you will want to stop leveraging.

3) If you finance the car and have a $3000/mo payment, the thought of writing that check every month after month will probably eat away at your enjoyment of the car. I remember how it did during Chicago winters on my NSX. Write $1000/mo checks from November to April without ever driving your car and you'll know how it feels.

Since I paid cash for my Ferrari, it doesn't matter to me when I don't drive it for a few weeks. Realize that if your payment is $3000 a month, you are paying $100/day for that car to sit in your garage. The car is also depreciating each day. Imagine writing a $3000 check each month and it is also depreciating by $1000 a month. That's a $4000 swing each month and if you really weren't able to afford this car, believe me you will be selling it quick.

I'm at the point where I would pay cash for any car that I buy in the future unless the rates are super low like 0.9% for new cars. I would probably put down 50% on any home I buy. My goal is to lower my expenses as much as possible now.

 

[Vigilante]

My goal is to lower my expenses as much as possible now.

Worth repeating.

 

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[million$$$smile]

If I could afford to pay cash for an exotic car, I still wouldn't buy it. I would figure out a way (or have someone that could) to have my business pay for it. I just don't feel I need to outright own something like that, just have it available for my use daily if I'd like to.

Randall

 

[Kak]

I would join one of those motor clubs. They cost about as much as a payment on one of these cars and you can take whatever you want for like 2 weeks and bring it back to get something else. They take care of all the maintainence and headaches. Then you can always just quit if the payments outweigh the enjoyment.

Here in houston they have one with new ferrari 458s, gallardos, astons, rolls royces, bentleys, masaratis...

Then just have a reliable personal car like a toyota or something for airport parking etc...

 

[CommonCents]

If you are considering a high end car there should be no concern of any risk to your finances. If you are worried about your business going down hill, you aren't making enough money or have high enough net worth to consider a car in the first place. You should be in a position to not worry about the purchase or payment at all no matter what.

I look at purchase/financing as time value of money. Plunking down a chunk doesn't lower expenses, you just pre-paid your "expense", saving on interest expense, but also taking a hit on opportunity cost earning value of that chunk of money you no longer have. A killer deal could pop up and you wouldn't have that money to put to work. If you can conservatively earn a better rate on money than it costs to finance, why not. Obviously personal preferences matter to some people as far as being debt free, me?, it's just math as long as you aren't stupid about over-leveraging.

 

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[DeletedUser2]

I like financing things...

as the lender.

the thought of people getting in the morning every day, and slogging off to work, working hard every day, coming home and sending me a check, just tickles me pink



I must have been a banker in another life.

I still get monthly checks for shit I financed for people , 10 yrs ago.

so I LOVE it when people finance things......


Z

 

[Vigilante]

I would join one of those motor clubs. They cost about as much as a payment on one of these cars and you can take whatever you want for like 2 weeks and bring it back to get something else. They take care of all the maintainence and headaches. Then you can always just quit if the payments outweigh the enjoyment.

Here in houston they have one with new ferrari 458s, gallardos, astons, rolls royces, bentleys, masaratis...

Then just have a reliable personal car like a toyota or something for airport parking etc...

Now that I like, but the fees should be less than a car payment for sporadic use.

There are boat clubs in Minnesota. For $5k, you have access to a fleet of boats for a summer.

So you can BUY a boat for $30k + slip + maintenance, or you can join the boat club, use a fleet of awesome boats, and drop the keys with the dock boy at the end of the day.

No brainer. (and a write off for business use...)

 

[Kak]

Now that I like, but the fees should be less than a car payment for sporadic use.

There are boat clubs in Minnesota. For $5k, you have access to a fleet of boats for a summer.

So you can BUY a boat for $30k + slip + maintenance, or you can join the boat club, use a fleet of awesome boats, and drop the keys with the dock boy at the end of the day.

No brainer. (and a write off for business use...)

It isnt sporadic. You can always have one in your driveway though.

 

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[CEBenz]

Now that I like, but the fees should be less than a car payment for sporadic use.

There are boat clubs in Minnesota. For $5k, you have access to a fleet of boats for a summer.

So you can BUY a boat for $30k + slip + maintenance, or you can join the boat club, use a fleet of awesome boats, and drop the keys with the dock boy at the end of the day.

No brainer. (and a write off for business use...)

If ever there was a good thing to do that with, it's a boat. Things are an enormous drain to keep up. Not to say you can't make money on them, they just tend to be very maintenance intensive. Heck, a boat can be written off as a second home for a wage earner if you get down to it. I do the next best thing. I have friends with boats. Much cheaper. lol

 

[EastWind]

I'm siding with the vast majority of opinions shared on this thread. If you can't cash it out very comfortably, you can't afford it.