Ferrari Financial Services - Balloon Financing

Thank you!

 

Why not call your dealer and get the most accurate up to date info? Hate for you to get misinformation.

 

Called my dealership today, not sure if this is specific to them or to FFS but he said the rate is closer to 5-6% I will get a definitive answer on that tomorrow. Did confirm 5 year loan regular financing closer to 4% or the quoted 3.74% above. Hope this helps

 

What is the advantage of financing through FFS compared to banks?

Rates are much higher at FFS.

 

Hmm but 4.5 APR is so much more than eg 1.2 APR.

In the end you need to pay the total amount anyway or am I just stupid?

 

One I see is that it’s not on your credit


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Sorry to rehash with a basic question re balloon financing-

Cari is $330K. Down payment $30K.
Balloon is 60% of the remaining $300K ie $180K
Is the monthly payment the same as taking out a $120K loan over 48-60 mos at the prevailing interest rate?

 

So just spoke to my dealer, sales not their financial manager. Little more background, I am a first time buyer. He said for the F8S that I have on order if it came today residual would be 65% and that the APR on 60months for balloon financing is 5.5%. Since I’m a first time Ferrari needs a minimum of 10-15% down. Seems different than other advertised posts but that’s my experience thus far.

 

The crazy part reading this thread....all the (usually correct) posts back in March 2021 about expected depreciation on the F8. No one lost 30-35k this past year, that's for sure! Not with cars 100k+ above MSRP or even more for Spiders.

I didn't disagree with that general theory back then, and I still don't think this will continue. But unreal to see.

 

I think I finally start to understand why people use FFS balloon to finance their toy.

Basically you can buy a more expensive car which mathematically you can't afford with your income.

eg. (sample numbers used)

500k car
upfront 100k
renting 60m 200k => 3.3k / month
balloon 200k

Let's say can only make 300k with you income it gives you 5 years to come up with the balloon payment in the end of you just sell it it that time for most probably a higher amount.

This theory means FFS loans you more money than you can afford (above case 3.3k / month compared to 400k * 60 = 6.6k / month.

So FFS don't check your credit background and are just happy you can make the monthly payments on time?

 

You are incorrect, that is not the reason that most buyers look at a product like this. I would wager that of the people who finance/lease their cars, 90%+ COULD have paid cash but chose not to. There are a multitude of reasons - taking advantage of sales tax rules, better return on other investments, income tax benefits, etc. Not being able to afford it is a small, small part of this group.

 

this is completely wrong

 

Ok then I still don't get it why you won't finance (renting, leasing) through a traditional bank at a lower rate.

 

I can’t speak for everyone (I lease for various tax advantages), but I would assume people using the ballon option are leveraging the lower monthly payment to improve cash flow / get a better return for that cash elsewhere. Very similar to a reason for financing at 3-4% rather than using your own capital. Others who use the ballon program can comment on their personal experiences.

 

It was the same in 2006/7 before the big housing collapse. Used Ferraris were selling for 50k-100k over sticker. Then after the bubble burst. 100k under.

 

Got it. I'm used to pay cash for toys but might do this next time.

I just thought there were extra reasons except for the obvious

 

I think that there is a few more pieces to the puzzle that are needed to make a final financial decision on whether to choose a balloon car loan or a traditional car loan.

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For someone with the financial means to choose either the balloon payment loan or a more traditional car 5-year loan, you need to analyze the additional "cost" of the balloon loan and determine if you could invest the monthly payment savings differential to generate an above breakeven ROI in comparison with the traditional 5-year loan. I see comments about having "extra" money to invest if one chooses a ballon loan. But, to be fair you also need to take into account the costs of a balloon loan as well.

The balloon option has a monthly payment of $3,422.91. The traditional 5-year auto loan (no balloon payment) has a monthly payment of $6,160.94. So the amount of money that one has to "invest" is $6,160.94 - $3,422.91 = $2,738.03 per month over the course of 5 years. The total "investment" potential over the 5 years is 60 months X $2,738.03 = $164,281.80.

The balloon option has a total interest cost of $58,574.80. A traditional 5-year loan will have a lower interest rate - I assumed an actual of 2.75%. The traditional loan has a total interest cost of $24,656.67.

The difference in the interest costs between the balloon loan and the traditional 5-year loan is $33,918.13. All things considered, someone who chooses a ballon loan is paying $33,918.13 for that loan in comparison to a traditional 5-year auto loan.

So, if one could invest $2,738.03 every month over the course of 5 years, could that investment generate a minimum return of $33,918.13 just to break even?

Assuming that every monthly investment of the $2,738.03 generates an equal return ( a big assumption ), then what rate of return do you need to cover break even costs of $33,918.13?

If one invests $2,738.03 every month for 60 months, and you want to break even at $198,199 ($164,281.80 total investment plus the breakeven interest costs of $33,918.13), then I calculate a consistent and minimum annual 8% rate of return AFTER taxes.

So, if you believe that you can get better than an 8% consistent annual rate of return AFTER taxes, the balloon loan might be favorable. But, remember that at the end of 5 years with a balloon loan, you need to pull the $200,000 from another investment to pay the balloon or roll the $200,000 balloon into yet another loan with more interest costs.

The car's depreciation has no impact on this calculation - except psychological if one chose the ballon payment, the car depreciated, and at the end of the 5 years that person effectively owes more than the car is worth.

I hope that this info helps in the analysis.