Related— not asking anyone’s personal numbers on this... but what % of nw are people comfortable using towards cars toys? I’m sure recent boom is affecting the car market and values.
Well this is an impossible question to answer briefly, but here are a few of my "opinions" Simple answer to your question is no more than 5-10% of net worth, but I prefer to keep it below 5%. Cars, boats, planes, etc are generally a depreciating asset, unless you are really good and are able to buy toys that appreciate in value - I have done that several times with classic corvettes. To me the more important factor is - how will this impact your cash flow and how much debt are you in vs your income - do you have a good stable job, do you have multiple streams of income, can you afford a financial hiccup. In other words, if you make $200k per year and have a mortgage on a $1.5m home, have 2 leased cars for daily driving, wife that works part-time, and kids in private school, then you may want to pass on a Ferrari for now. If you are single, make $300k, live in a $500k townhome, have a leased BMW 3 series, have no debt, pay your credit cards each month, and take reasonable vacations, then you probably can easily afford a nice Ferrari. Also, it depends on they type of car and cost of car you want to buy/lease/finance, etc. For example, if you can find a 360 in fantastic condition for $80k, then there is very little risk. For me, a low miles single owner 4,500 mile F430 spider for $140k was a good deal. Now if you want to lease a new F8 for $5,000 per month (this is a guess) and then pay another $5,000 per year in insurance, then perhaps that is not such a smart move. Finally, you have to ask yourself - why do you want a Ferrari, Lambo, Corvette, McClarin, boat, plane, Rolex, etc. Can this be used for "business" purposes, is this only for weekends, is it because you have a burning desire. There are no right or wrong answers, other than these hobbies can be expensive if you make the wrong decision (bad car, bad loan, bad plan) or they can be a fantastic way to enjoy your financial success (good car, good loan, good plan). In the end, what point is there work your ass off, save every penny, and die with tons of money in the bank. For some people, they want a nice home, others want nice vacations, others nice watches, others nice cars, others a boat, others a plane, others wine/women/song, and the list goes on. Choosing one or two of these can be a reasonable "disposable money" expense, but doing them all without deep pockets is not sustainable. For me, I LOVE to have a weekend vehicle (non daily driver). It could be a classic corvette, jeep wrangler, dune buggy, slingshot, motorcycle, JetSki, or a Ferrari to take out on the weekends and evening drives. One thing for sure, not too many vehicles can compete with a red Ferrari spider with beautiful exhaust notes. Finally, yes, the prices for nice Ferraris are higher than they were 12-24 months ago, but NOBODY knows where they will be in the next 12-24-36-48 months from now. They may go higher or crash and burn. It really does not matter too much to me as I have finally purchased a perfect Ferrari for me and this may be the first or only Ferrari I own. If it runs well and has low burn rate, then I will keep it for several years. If I find a killer deal on a 458, then perhaps I will sell. Not really sure right now.
I started my Ferrari search looking for a 458 Spider as I know it is an awesome Ferrari (perhaps the best bank for the money of all), but I could not find any reasonable ones under $225k and many were $250k. Also, when I saw the F430 (and even gated 360), I truly fell in love with the older classic cars with the analog gauges and rawness where this is truly a immersive drivers car. The 458 is so refined and so classy and so modern, that I felt that if I bought this, then I would never go to a F430 or classic. I also am hoping to lose less money on a 430 than I would on a 458 as I love this hobby, but really hate to lose too much money. I will never know for sure what was the correct choice, but I am happy with my decision so far. Besides, I could keep the F430 a year or two and trade it in (or sell it) for a 458 when I find a reasonable deal. The F430 is a super painless way for me to dip my toe into the Ferrari water, and I am looking forward to taking her out for spins. (I am still waiting for the shop to finish getting her ready to drive).
Here’s ye old bottom line. Interest rates have flatlined and are not going up significantly anytime soon. Simply put, those on the commanding heights cannot afford for interest rates to go up. We are back to the ‘70s where the Fed held interest rates below the inflation rate. Let’s see, I can borrow at 2% and invest at 6%. It appears many BaT sellers have gotten hip to this strategy. One word of caution: the ‘70s didn’t end well. You can draw a straight line between the ‘70s madness and the subsequent RTC bailouts in the ‘80s. How long will the current madness last? If I knew, I certainly would not be wasting time on FerrariChat. My guess is the end will see a collapse of the dollar maybe followed by a worldwide depression. But who knows when this will happen? Japan has been pushing on that piece of string since 1990. Until then, that good time Rock ‘N’ Roll can never die. Sent from my iPhone using FerrariChat.com mobile app
Whoa. All this yakin about fancy "financing" a Ferrari and you have not even driven it yet? Paying a mechanic on top of the "cheap" monthly interest payment. Sounds like all you care about is the money. Nothing wrong with that but my guess is most Ferrari owners care more about the cars. Now, this is snarky but if you think that much about the money and the money is that important to you, you have no business playing with Ferraris unless you have a car that you can maintain and repair yourself. I am old and have always felt like toys should be paid for with cash unless you really, really have to have it, but cannot "really" afford it.
I drove the car before buying it and it ran awesome, then I took it for a PPI. The car needed new tires (it had original 2005 with only 6300 miles on them) and new sensors. I also decided to get a new battery and all fluid/filters changed. There was a small issue with the convertible top (piston) that the dealer is paying to fix and the part needed to be replaced or rebuilt. Then I will get it detailed (possibly ceramic coated) and then bring her home. I figured that I would do all the mechanical maintenance before driving it and having to drive it back for repairs. I am not sure what you mean implying that most Ferrari owners care more about the cars - as so do I and that is why a Ferrari certified mechanic is working on my new (16 year old) car to make sure it is SAFE for me to drive. I am not sure what you mean when you say that I think that much about the money, as I really don't focus on that, but when I needed to pay for the car, I ran thru a few different options and chose a LMA and then decided to post about it. I would say I spent more time reading and replying to FerrariChat messages than I collectively spent figuring out how to pay for my new car. I have 100% no desire to maintain and repair the car myself as I have no training or skill as a mechanic, but I will gladly pay an expert to do the work for me. Based on your post, you obviously are old (as you admitted) and may not know that we are no longer on the gold standard (as of 1973) and there are modern ways to avoid using cash, such as a credit card, debit card, ApplePay, Zelle, Paypal, CashApp, Bitcoin, NFT, and many others. If these are new words and phrases to you, then you should probably think about giving up your drivers license and cars and just stick with Uber, unless you can't "really" afford that.
The financial methods used to use a Ferrari probably vary by occupation, nw, values etc... I find the variations fascinating. Similar to the old millionaire next door books. —- I can say since I work in oil and gas..... I buy toys for cash only. I feel like we are on the verge of another commodity boom time... so perhaps even my prehistoric methods will find another fun car. I never wanted to be another oilfield cliche’. You fortunate chaps w low frequency/amplitude cycles can use the special instruments for f cars! ——
I will have him put nitro in the tries for me and not worry about it. Perhaps I will now use full service when I fill up at a gas station.
Wait, what? Are you saying markets don’t defy gravity indefinitely? LMAO One of my favorite times has to be going and buying all of the fire sale stuff from all of the dudes swimming naked. I can’t wait for the next sale. I think it’ll be here soon.
I am familiar with LMA through Merrill, I think what buyer did was very smart given the inflatinonary environment, money is basically free to borrow at least short term, can still enjoy growth on his actual cash or cash equivalents, and always pivot out if something goes south. The price of 430's may already be inflated but he's aware and is williing to eat the difference if need be. It would be much different if he was not in a position to cover, but typically if you have an LMA you are. Smart move IMO, hopefully it works out favorably Merrill makes it particularly easy for clients to access their liquidity which may be causing some of the confusion in this thread for people who haven't used Merrill. He basically paid cash in a complicated way
I also am fortunate to have several Merrill LMA's and business accounts IRA's etc. that do have a lot of advantages for wealth investors. For my F430 purchase last June 2020, I had a cash 70% down payment, and originally had a 10 yr conventional loan at 6.9% on the 30% balance for a few months before cashing it out by borrowing from one of my LMA's at 2.4% . To me it was a no brainer. You are borrowing money from yourself,and paying it back to yourself (at your own rate) only slightly denting the earning power of the LMA assets, but you could also be using that money in higher ROI investments, REIT's etc. Some HELOC will work the same and are at much lower rates than the conventional loans offered on exotics. YMMV
I hope ur getting better rate of return then 25% should be like 40% if u stay on the zero risk 60% with low risk. But what do I know
i did the same on my gated v10 R8 4 years ago..... look at the price now, it paid it self and more! i also did the same on a F1 430 at $95000usd ... hoping it would be $140 in 3-4 years.
I’m using a HELOC for my FF since the first year interest rate is locked at 1.99% then it goes to 3.49% variable after that. The money is too cheap not to use it. Rather keep my cash in stock market and crypto. The way I look at it is this - what’s the max I’ll lose on depreciation? Maybe $20-30k at absolute worst. Yes there are maintenance and repair costs. But worst case scenario I could just pay off the HELOC and have no loan at all. Best case it could be $200/mo to own an FF plus the maintenance/depreciation cost. When I sell the car I’ll pay back the borrowed money. MY house LTV is like 30%, even in a market crash I’d be fine. Normally I’d say using a HELOC for a car is incredibly stupid because rates are usually 5-7% and cars normally depreciate. But FFs are about done depreciating and interest rates are 2%, so here we are.
