$302 per month for F430 | Page 3 | FerrariChat

$302 per month for F430

Discussion in '360/430' started by F430Bill, May 7, 2021.

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  1. efg2014

    efg2014 Formula Junior

    Sep 14, 2014
    611
    Northern California
    Interesting thread and Bill definitely has an avant-gard approach to getting his first f-care. I'm guessing he is/was a pretty creative and good doctor.
     
  2. Meister

    Meister F1 Veteran
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    Apr 27, 2001
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    what were those things called?? mortgage backed securities?
     
  3. one4torque

    one4torque F1 Veteran
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    May 20, 2018
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    Worked for a guy who would finance his new amg’s w his dividends....
     
  4. F430Bill

    F430Bill Karting

    Apr 21, 2021
    55
    South Florida
    Full Name:
    Bill
    I guess your description of "wiped out" would imply the "possibly or probability" of losing 50% of my $150k Ferrari investment and my $300k securities to cover the loan would cause me to go bust and that definitely does not describe my financial situation.

    I explored multiple options to pay for my Ferrari and those included: cash, loan, lease, HELOC, LMA, etc and I simply chose the LMA option as that was fast, easy, and pain free. Of course, I know that this has to be paid back. I am sorta giving myself my own loan, rather than liquidating my spendable cash, stocks, bonds, real estate, etc. The risk is very minimal in my situation, even if I drive the car into the ocean and lose all its value (not planning on doing that).

    Assuming you are referring to Nassim Nicholas Taleb (ie "Skin in the Game") he focuses on the philosophy of economic asymmetry, risk sharing, rewards, and social justice. He is against fund managers that get paid a percentage of their clients wins (using other peoples money), but suffer no penalty for losses - thus they are incentivized to take increased (client) risks to reap a larger personal rewards (commissions).

    I actually enjoyed reading an essay by Nassim Nicholas Taleb where he described a new term "Intellectual Yet Idiot (IYI)" as someone that is semi-intelligent, well-pedigreed "who are telling us what to do, what to eat, how to speak, how to think, and who to vote for". I also took delight in the concept that Taleb describes some people as educated and intellectual, but that does not always mean that they are not an idiot for most purposes as some people can be an intellectual, yet still be an idiot.

    I only posted this thread to share a creative financing option, not to brag, gloat, or convince anyone else to do the same. I guess time will tell if it was smart or not. Besides, I am not sure how long I will own the car - few months or few years. If I love the car and keep it for a while, it will get paid off, but in the short term, this financing seemed good for me. I have owned lots of weekend cars (classic corvettes, etc) and finally bought a Ferrari.

    I doubt I will keep the car forever, so I am only taking care of this car for the next owner and trying to keep my expenses reasonable and be smart with my money.
     
  5. F430Bill

    F430Bill Karting

    Apr 21, 2021
    55
    South Florida
    Full Name:
    Bill
    Thanks. I do read a lot and just try to be smart (or legally creative) with my investments and buying a $150,000 Ferrari (aka it's just a toy)

    Definitely not the same thing as those are were abused in the 2008-2010 recession where greedy financial *******s repackaged subprime home loans as A or AA or AAA collateralized debt obligation (CDOs) and sold them off as safe investments.

    Look up LMA and it is just a loan to myself against an asset I already own, just like a HELOC on a home. I could have done a HELOC, but chose LMA for this purchase.

    Technically I am doing the same as I make more than $302 per month in dividends (assuming the value holds at $150k and that is doubtful), but for the tiem being, the loan is only $302 per month (for now)
     
  6. one4torque

    one4torque F1 Veteran
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    If you took out a loan who holds the title?
     
  7. F430Bill

    F430Bill Karting

    Apr 21, 2021
    55
    South Florida
    Full Name:
    Bill
    I am pretty sure your quote from Nassim Nicholas Taleb applies to gambling in a casino where 100 people bet a set amount and all eventually go bust and has NOTHING to do with me drawing $150k from my own LMA that is securitized by my own assets (need at least $300k as the LMA is based on 50% of pledged assets) and please do not assume I only have $300k and risking it all buying a used Ferrari.

    Here is a link to a Taleb essay describing risk
    https://medium.com/incerto/the-logic-of-risk-taking-107bf41029d3

    Nassim Taleb was a day trader and that is where most of his wealth has come from. He believes deeply that taking risks is how you truly grow in almost all aspects of life. His approach to risk is to look at all the variables and then make a decision with all or some of the information at hand.

    That is EXACTLY what I did before using my LMA to buy a F430.
     
    Stealthssfc likes this.
  8. F430Bill

    F430Bill Karting

    Apr 21, 2021
    55
    South Florida
    Full Name:
    Bill
    I do....I paid cash for my Ferrari and own it free and clear.

    However, I took the cash (actually wire) from my LMA that is pledged against my other assets, thus the two transactions are not linked. The LMA allows me to take cash out at 2.4% interest (as of today) for any reason and I actually do NOT have a monthly payment, the loan just grows about $300 per month so next month I will own $150,300, etc. until I pay it off.

    Just to use simple math - if I have $1,000,000 assets, then I can get $500,000 from my LMA and in this case, I used $150,000 BUT my assets can not drop below $300k
     
  9. buddyg

    buddyg F1 Veteran
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    Sep 20, 2004
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    At any time he could do a traditional loan and payback his LOC. It’s not an awful idea with low interest rates.
     
    F430Bill likes this.
  10. Dewinator

    Dewinator F1 Veteran
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    Jun 22, 2017
    5,971
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    Not about how relevant the amount is to you. Small potential gain for a larger potential loss. Opposite of barbell strategy.
     
  11. PCarRI

    PCarRI Karting

    Feb 23, 2020
    221
    Rhode island, USA
    I'm still flabbergasted that people are paying cash for cars right now. My money invested returned 35% last year, why wouldn't I use the bank's money for 2.5%?
    Related to the original post, this guy seemed to find a different way to buy the vehicle. Who the h*ll cares if it costs him $50k in a year or he pays down the loan $50k? Sheesh some of you guys just like to find something to b*tch about.
    Bill, gratz on the FCar and welcome to the family!
     
  12. VAF84

    VAF84 Formula 3

    @F430Bill Thanks for the intro to LMA’s. Very interesting; will spend some time learning more about this financial tool.
     
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  13. F430Bill

    F430Bill Karting

    Apr 21, 2021
    55
    South Florida
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    Bill
    100% agree. I did pretty well over the past 12 months that technically would make the car free, but this is a Ferrari forum, not an investment forum.

    One more time - for me this was a simple math equation. I needed $150,000 and took the money from my LMA as the fastest and easiest and cheapest option.
     
    Stealthssfc likes this.
  14. ItalienCar

    ItalienCar Karting

    Nov 12, 2016
    62
    California
    Aren’t these loans Variable/directly related to the Libor rates?
    Therefore if the Fed do increase the rates, your interest only payments will go up respectively.


    Sent from my iPhone using FerrariChat
     
  15. ItalienCar

    ItalienCar Karting

    Nov 12, 2016
    62
    California
    The conversions cost at least $27-30k. Plus the resale value is not the same between a converted Ferrari 360/430 vs a Factory manual. Manuals are definitely more unique, especially the 430s...


    Sent from my iPhone using FerrariChat
     
  16. F430Bill

    F430Bill Karting

    Apr 21, 2021
    55
    South Florida
    Full Name:
    Bill
    Correct, if interest prices start to jump, I will pay the balance off.

    But at 2.4% or so rate, it is a no brainer for me to take a loan. In fact, I think I can write off the interest off of other gains (I am not an accountant, but that is my guess) and that is a great benefit to drive the cost below $200 per month.

    I have no interest in a gated conversion. I get why people do them, but I prefer to keep my car as close to original specs as possible. I had a 1967 corvette with sidepipes and loved them, but when I went for NCRS top flight judging, I had to remove them as they were not factory correct.
     
    ItalienCar likes this.
  17. ChipG

    ChipG Formula 3

    May 26, 2011
    1,722
    Santa Monica, CA
    #67 ChipG, May 9, 2021
    Last edited: May 9, 2021
    Says who? LOL do you know know about all the new kits?
     
  18. ItalienCar

    ItalienCar Karting

    Nov 12, 2016
    62
    California
    The EAG one has been the main one... if you know of others that are less than $20k please share!!!


    Sent from my iPhone using FerrariChat
     
  19. one4torque

    one4torque F1 Veteran
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    Do the assets used to secure the loan continue to stay invested and generate 30% ror using this method?

    per prior post I don’t see anyone complaining here except the guy complaining about complaining:)

    thx for sharing your novel (to me) finance scheme.

    I’m sure many folks would love creative secure access to the strong investment growth.
     
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  20. F430Bill

    F430Bill Karting

    Apr 21, 2021
    55
    South Florida
    Full Name:
    Bill
    The assets can be used for pretty much anything. I have a mixture of stocks, bonds, cash, mutual funds, structured notes, covered calls, etc. and the LMA is based on the total portfolio and maxed at 50% loan to value. Fortunately, I do have a wide cushion and not worried about the risk for a $150k draw. Also, 30% ROI was used by someone else and that was only over the last 12 months. If I generated a 30% yearly ROI, I probably would never pay cash in full for anything and simple draw off an LMA.
     
    VAF84 likes this.
  21. one4torque

    one4torque F1 Veteran
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  22. RedNeck

    RedNeck F1 Veteran
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    Jul 8, 2016
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    Late to this party, and avoiding P&R, with the bubble-y state of things and the questionable decisions of some at the current moment, that seems like a gamble I would be wary of...and paying 300+ a month of interest gives me the creeps anyway. I don't even think I pay that on my house. I took out a loan for my 360, refinanced it, paid for a couple years, then just recently wrote a $30k check to get it out of my hair. Free car or not, nothing's better and less risky than having a free and clear title in your cabinet.
     
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  23. CoreyNJ

    CoreyNJ Formula 3
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    Apr 17, 2006
    2,004
    New Jersey Shore
    If I could guarantee a 30% return every year with near zero interest rates I agree and would borrow the money if I could lock in the low rate. My problem is I’m a pessimist and know inflation is already here and if my return would be 30% consistently year over year it’s because of inflation and money pumping that will catch up to us soon, not a perpetual bull market that can go on forever. Interest rates will be going up soon to cool off inflation. It’s not a matter of if, but when.

    One quick question on your LMA, is it fixed or variable rate?

    Cheers,
    Corey


    Sent from my iPhone using FerrariChat.com mobile app
     
  24. F430Bill

    F430Bill Karting

    Apr 21, 2021
    55
    South Florida
    Full Name:
    Bill
    My LMA is variable and changes weekly, and perhaps daily, but for now it is really low....under 2.5%

    But it only shows on my statement as total for the month, but I can see that it jumps around weekly for sure.

    I guess anything under 5% is acceptable to me and as other have implied - buying a Ferrari or any other $100k investment should only be done if you can afford it. This is definitely a luxury purchase for me but I am hoping I made a good purchase

    Guys (and gals), I am new to this forum, but not to bbs or fun cars (or investing) and have owned lots of nice cars. I am a little surprised that buying with an LMA is so new to people here as I figured most people would be familiar with the concept (but may be called something different. For MOST of my large ticket item purchases - I generally pay cash as I hate debt and I am a relatively conservative investor ( only 50% in stocks, then the rest in bonds, structured notes, cash, fixed income, dividend, private loans, REIT, rental real estate, etc). I have no debt on my homes or other cars.

    Although this is my first Ferrari, I actually learned how to drive stick on a 308 BTB when I was 15yo and finally decided to pull the trigger on buying a Ferrari. I looked at lots of them and finally decided on a red F430 spider as my first choice. I guess I would have bought a 458 if the prices were in the $175-200k range, but those have spiked in the past year. I contemplated a gated 360, but decided on the 430 as that seemed to hit the sweet spot. I was NOT interested in a coup or California.
     
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  25. BMW.SauberF1Team

    BMW.SauberF1Team F1 World Champ

    Dec 4, 2004
    14,244
    Buying a Ferrari with a line of credit (HELOC or otherwise) is not new on this forum. I'm surprised to see how many are so against it, though. If the rate of the line of credit is less than the return you are making on your assets than it makes sense to do. I don't use BoA anymore, but it seems their ML LMA rates are better than my current bank/broker for over $15m in assets at least (not that I am in that territory lol). I don't see much risk with a $150k purchase used this way when 7 figure accounts have monthly (sometimes daily) swings greater than the value of that purchase and daily swings cover the difference in car negotiation savings.
     
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