Buying / trading in time

Yes its normal

 

Yes normal, when I went to get my second Fcar the dealer said "we knew you'd be by soon". I asked why, and he said the average customer he sees/sells every 18-24 months, I was on month 21.

 

It generally means you can't afford to keep it.

 

Showing my non-worldliness here! I'm sure that is the case there. In the US not so much.

Many flippers try to move in and out of cars in an attempt to avoid miles and the two year or so steep depreciation. Some have detailed that it is not so inexpensive to do so. Others of course are working the list to get the magical LEs where they can drive for free or even sell for profit. I think a lower percentage would be those that buy what they like and trade to keep their interest up as cost is of no concern. My guess is the very lowest are those that buy a new production car, pay cash to keep and don't look back. All my own assumptions of course. Also, just because some buying habits are common, its opinion if you call it normal. What's normal for an enthusiast may not be normal for a flipper. Dealers certainly encourage flipping.

 

In the UK frequency of change is generally determined by the finance package use for the vehicle. Mostly 24-36 months here.

More than 80% of all new cars in the UK are financed, when it comes to supercars that number is even higher, circa 90%.

Warranty is also a consideration. So buying new and running until there's 6 months left on warranty is a ploy often used.

It's not an accident, it's a manufactures business model. So the small percentage of people that buy new in full, in cash and keep their cars for 5,6, 10 years are not great customers as far as dealers are concerned. Unless you collect cars that is.

They want to sell you a new car every 24 months. Buy, use, sell, repeat.

 

Bought my GTC for cash UK they thought I was a madman, so accustomed are clients to considering what they can afford monthly and not capital/principal in the UK

 

Just to add to the other side of the story, it didn't seem out of the ordinary to pay cash when I bought my F12 in the UK.

 

I had a conversation with another UK owner who told me he bought his 488 on an interest only payment basis. Not something I would feel at all comfortable with personally.

 

That would scare me too,
I have kept a number of cars as keepers and with hindsight wished I'd kept a few more but some cars don't steal your heart the way others do. With some I've decided after only a few weeks that it will be traded in at the end of the year or thereabouts with others my clear intention was to keep it for ever, how ever long that may be. Doing that unfortunately just adds to the numbers and if you prefer to drive your cars rather than just admire them it becomes a problem in itself.
Some purchasers in the UK are only interested in the monthly repayment cost which they can factor in to their cash flow so as long as the bottom line doesn't change too much they order new as often as they can. New cost and trade in value are secondary to the monthly cost and I'm sure dealers fashion deals around this knowledge.

Personally I prefer to pay for my cars and mentally write off the cost which, to me anyway, makes the bitter pill of depreciation easier to swallow.

My Lusso, for example, is now 5 weeks old and already covered 4,000 miles. when I first drove it it didn't resonate immediately. The four wheel steering felt alien, the engine was tight and felt restricted, slight wind noise at speed around the drivers door (being resolved) but now it has loosened up after a bash down to Italy and around, the four wheel steering feels instinctive and the seats are moulding to my bottom I cannot think of another current Ferrari that would offer me more.....it could well be a keeper and with a Portofino on order, which would represent the perfect foil to the Lusso, that's yet another garage space taken up.

I too was surprised that often a 3 year old Ferrari has had 2 or 3 previous owners and questioning the dealer on this it appears to be not uncommon.

 

I guess it depends on the back story. If you're on interest only because that's all you can afford to pay then it's madness. If the £300K or so is being employed elsewhere usefully but is quite liquid if required it might not be so daft. At the extreme it's actually quite logical.

My business partners brother in law (are you still with me!) works for Lombard Finance in the repossession department. He's up at the higher end of the food chain and is dealing with planes, helicopters, yachts and such like. He also gets to see some of the new business they do.

The low interest rates recently created some anomalies with some of their wealthy clients who were financing yacht purchases, these were £10 million + purchases. These customers were able to borrow at silly cheap rates due to their creditworthiness and security, these were rates at 1.3% and similar, yet the same customer had their £10 million plus capital on a high interest yielding account in their Coutts accounts at 2% and sometimes 3% interest rates. RBS owns Lombard, Natwest and Coutts so the bank were effectively paying the interest rate on the customers yacht purchase and some.

It's pretty much the same reasoning behind Mark Zuckerburg taking out a mortgage on his home. Why does a Billionaire need a mortgage? Simply because the numbers stack up and it would be daft not to.

Financially the world is in a strange place at the moment, it's not really a bubble, it's more a vacuum created by near 0% central bank rates. It's not healthy and it's keeping the prices of these wonderful cars sky high along with many other assets. Part of me thinks it can't continue and there's an inevitability that its all going to go pop.

 

All you point out makes great sense except the Zuckerburg reference. A man worth $71B can buy many thousands of homes cash worth $1M a piece and it would just be in the round off. At some point I would think the physics breaks down.

 

https://www.csmonitor.com/Business/2012/0717/Zuckerberg-s-1-percent-mortgage-Why-does-a-billionaire-need-a-loan

 

A 2012 article that misses my point entirely. He has accumulated an average of a billion a month over the last five years since that article was written. There are also reported earnings as much as $3B to $4B in a single day. Saving some interest on a home loan? Really. Perhaps he also flips cars to avoid the "steep" depreciation as is the subject of this thread! Something else is going on and it could just be a stink load of money and a heavy geek factor.

 

'This is such a cool thread.

I am 40 and buy all our cars cash personally and then expense back miles to the business with as high rate as I can get away with. It's brutally expensive to do this considering our tax rates but if you have my accountants and the CRA (IRIS) in your office almost bi-annually doing all types of audits and trust exams you keep all this stuff off the books and just swallow the pills to follow the cars hobby. I put 42oookm on our FF took a beating depreciation wise but it was all worth it. Bought a CaliforniaTHS and consigning it for the accelerated Lusso they gave me and hope to add the Portofino after. If I don't get ok money for the CaliforniaTHS I am going to keep it and hold out a bit and delay the wife's Cayanne turbo another year. The CaliforniaTHS is just too good a car and customized to me perfectly that a few days without and I am already missing it like crazy.

Point being I really like to just pay for them and get it over with BUT when I use to finance and lease I felt like I was not as quick to flip. Now with the complexity of getting in and out is not as difficult it's easier to flip them and this is actually not a great thing for a car junkie like me. I thought I would be so happy with a Lusso and CaliforniaTHS, now I am trying to move things around again. Let the madness stopppppp!