Need advice on lease/458

http://www.ferrarichat.com/forum/showthread.php?t=301601

 

Leasing would be OK with a low money factor (i.e. interest rate) and a conservative (i.e. low) residual, especially if you can run some of the lease cost thru your business, thereby reducing interest cost even further. On a $275K car, residual after 60 mos. should be around 40% or so, or about $110K range. If the money factor is .00250 and with $30K down, making the "cap cost" $245K, your lease payment per month would be $3137 per month plus tax (whatever the state tax rate is in your locale). The above example is equivalent to an interest rate of 6% or so. Average interest per month is just shy of $900, so if some of this is deductable legitimately thru a business then it might make financial sense. The key is the low money factor. What are they offering? Hope this helps.

 

With an open end lease the leasee is responsible for the difference between the residual and what the dealer or anyone else is willing to pay for the car at the end of the lease. So if you take the above example, if the residual is $110K and the car is only worth $10K in 5 years, you will be responsible for the $100K difference unless you are willing to buy the car at that price. With a closed end lease you can just turn the car in to the dealer at lease end no matter what the value of the car is, with no responsibility to cover any additional loss of value. Hence my advice on making sure the lease, if open ended, has a low residual - so you are not "upside down" at lease end. If the car is worth more than the residual at lease end, then you will have equity in the car and may get that money back at the time you return the car. Best.

 

Another way to look at an open ended lease is that, essentially, the leasee owns the car and leasing is merely a way to finance it. You are not compelled to keep the car longer than you want, but are responsible for what it is worth at the time you decide to sell, if ever.

 

They want to steer you into an open ended lease because they make tons of money on it and you lose tons. A close end lease payment would be about $12K a month.

Ferrari doesn't have it's own finance arm like GMAC or the others. Why does your dealer care other than they are making lots of money on the financing? Your dealer is using a 3rd party to put the financing together.

Did you reads the thread I posted? Lot's of good info there.

 

I have never seen 6% rate on exotics But u never know though but in all reality these figures would be a deal and i would jump on it if they gave this type of terms.

 

Open-ended Lease is just like its name implies. Although it might be better to call it a Loose-ended Lease

The trick to an Open-ended lease is to tie down as many of the loose ends as possible, all of them if you can. That means that all the end of lease options are specifically laid out in detail at the end of the lease. And that you have 3 or more options at the end, again all laid out in detail. Open-ended leases require you to bear the risk of value of the property leased, so many of the lease/finance companies require you to qualify for the value of the property and even sometimes to requalify thru the life of the lease agreement.

Now with that being said, it is possible for an Open-ended Lease to be tailored to meet one's goals and objectives, especially with an asset like a new 458 Italia. Assuming the 458 will not depreciate like typical new Chevy or Ford. And by that I mean, if you go to a Chevy dealer and buy a new Impala, literally the minute you drive it off the lot it will depreciate a few thousand dollars. A used 458 is still above MSRP last time I looked

Now depending on who you get your lease rate from, read how low is the rate and I have a 1.9% rate on a new car right now, and what residual value you agree too and how many options they give you at the end of the lease with that residual and its disposition and how long the term is is, in most instances you don't want it to be over 3 years, and how well your other investments are going to do over the same period as the lease term. Lot of ifs ands and butts, but it is mostly your butt that is on the line So if you can handle the detials yourself or get a professional to do it for you, go for it.

One hint is, if you go to Leaseguide.com you can learn all about lease calculations and residuals and no doubt you can figure your own lease deal so that you can determine if you are getting a good deal, because one of the drawbacks to leases is that depending on your state of residence, many lease contracts don't show the interest rate and sometimes the agreed price of the car is modified. Trying to figure out a lease contract can be very confusing, on purpose

Bottom line is only you or a financial advisor with your best interests in mind can tell you if an Open-ended Lease will meet your goals and objectives. Although Leaseguide.com can go a long way toward figuring out just how good or bad a lease deal can be. Good luck.

 

Wow .00375 is 9% interest and if it is an Open-ended lease you are taking all the risk. I would hope you can find a better deal than that

 

HAHA!

So you pay $250K over 5 years and at the end you gotta come up with another $100K or give the car back?

This is a train wreck in the making. Pay cash or find a less expensive Ferrari.

 

Here is another approach to consider. Get a home equity line of credit, assuming it is big enough to cover the cost of the Italia.

Buy the Italia with the line of Credit. Then make payments to pay off the amount borrowed at least to the residual value point where you would sell the car, maybe 3, 4, 5, years out. Or just make payments that are high enough to cover even a very pessimistic value of the car in 3,4, or 5 years. If the car doesn't depreciate as bad as you think, you end up getting some money back when you sell it.

Also interest payments may be tax deductible this way and as long as you pick a reasonable residual value and make your payments on the line of credit, you can most likey get out and pay off the loan by selling the car any time during the next 3, 4, or 5 years. One of the nice things about this approach is that at least for the first 6 to 12 months the 458 Italia should not drop much below MSRP and so selling it and paying off the line of credit is relatively low risk. After 12 months, who knows, but hopefully it declines like the 430 and 360 which was slow at first and then started to really depreciate in the 3, 4, and 5 years after introduction.

Now this all assumes that your investments can outperform the interest charge on your home equity line of credit, which should be prime plus 1 or 1 1/2 percent. A good financial advisor should be able to do that for you.

 

You are wrong on one assumption, that is the depreciation curve....

Ferraris (mass produced ones, anyway) do in fact follow a pretty normal curve......and the current production numbers needed for profitability really do NOT bode well for the values of 458 Italias or Californias....

They will keep cranking them out, until sales demand is met....IMO

Look at what a 599GTB sells for today, and what all those who owned early paid in premium$ to be the "first on the block"......YMMV.

 

Leasing does free up capitol for other uses, that's the value.......

Those FNA numbers sound about the same as Chevrolet, asset value aside......

 

"Tax Deductible Interest" means you can subtract the interest you paid from the salary you made and only pay taxes on the remainder. It's not like you deduct the amount of interest you paid from the amount you pay in income taxes. So, basically, if you make the kind of income to be able to afford a $4000+ per month car payment then the interest deduction is going to do absolutely nothing for you in terms of what you owe in taxes.

This is all smoke and mirrors. Adding a 3rd party between you and your car will make it more expensive, not less expensive.

 

Sent you a private message regarding this.

 

Money factor of .00375 is crazy in this low interest rate environment. That is equivalent, as someone else pointed out, to an interest rate of 9% or so. Much better financing than that is available currently, even on 458's. Be aware that financing thru the dealer requires that you do your homework ahead of time. Hidden extra costs are often passed form the dealer to the client, to maximize profit. How? Let's say the money factor from FNA is actually .00325 and not .00375. The extra .0005 is extra that the dealer is charging YOU, thereby pocketing the difference. Do your own research before commiting, and that should keep you from getting swindled. Good luck.
BTW, a lot depends on your credit score when it comes to rates on financing.

 

Big Tex,

I guess it depends on what you define as a "pretty normal curve". As a former F&I manager I can't define a Ferrari as a normal depreciation curve as compared to a Taurus or an Impala which I would define as a "pretty normal curve".

New Ferrari models tend to hold or even elevate their value when they are first introduced and do this for the first 6 to 18 months depending on the model and its production numbers. Then as production starts to meet demand they start to depreciate and do so for sometimes 6 to 10 years or more where they at some point level off and stop declining in value. If by normal you mean that they will depreciate, then yes they do. But I would still argue the point that it is not "a pretty normal curve" as compared to the timing and depreciation experienced when buying or leasing a common Ford or Chevy. Remember you really can't tell exactly when the decline will start after new Ferrari model introduction.

My first Ferrari was an 1980 308 GTSi and was bought used in 87 for $26,000. I drove it for 10 years and sold it for $26,000. I see 80-82 308s going for 25K to 30K every day even today. That I would say is not the case for every Impala or Taurus that comes out of detroit, not withstanding collector muscle cars which are the exception and not normal and have to have a frame up restoration to get real money, unless of course they are time-capsuled

I see guys that are paying 50K to 90K over sticker for slightly used 458s right now. I don't think I have ever seen a Ford Taurus drive off the showroom floor and then back in 2 months later with 3600 miles and get over sticker. Again a Ford GT was a different animal and I would argue they did not follow a "normal curve" either.

All I was trying to point out to the OP was that if he can't pay cash, which is what he said and he wants to lease, which he said, and he wants advice which he said, then one thing to consider is that for a certain time period the 458 will not follow the "normal depreciation curve" and that is one thing to consider and may or may not work to his advantage.

With that said, you are correct in your assumption that a Ferrari will depreciate over the longer term and probably will come close as a percentage value as compared to a common Taurus or Impala but the timing on when that happens is anybodies guess, but yes it will depreciate, but you have to hope it doesn't depreciate by 90 percent after 10 years like an Impala does. At least let's hope not

 

tooo much!

 

I'm sorry I meant a "normal Ferrari depreciation curve"!!

You are correct of course about the scramble for new models esp. in the past...

But 2011 is a new day, in difficult times, Ferrari has made HUGE capitol investments in Factory facilities and as such has commited to Sales Volumes going forward for profitability.

So it's somewhat a new game....

599GTBs all over the place in the market some with delivery mileage only.

Saw a new 16M unallocated, available at $317K MSRP.......

To order your car by spec and color is still the same story, get on the list, order...and wait.

But, IMO only there's huge demand pent up on the production side to deliver cars.

To those people who play in this market, that's a good thing.

I have never heard of a dealer being 'forced" to lease instead of outright sale a floor planned unit...unless there's end of year residuals on business delivered to FNA Finance...

 

Yes, as you say 2011 is a new day and sometime in 2011 I would guess that 458 will start to depreciate. Probably by summer, but who knows when, but yeah you are right, it will happen.

And I agree with Big Tex about his dealer comment. Let's just say when I was in the dealership F&I world, that the truth became a casualty sometimes so the dealership could make its monthly or year end numbers.

And I would add that I had more latitude with the truth when I was doing a lease rather than a straight purchase or even a finance

With a Lease it really is kind of like the wild wild west, caveat emptor.

Anyway, the OP asked for advice on a confusing and very tricky subject. I think that so far if you take everyone's advice in to account, it should help the OP to get a better deal and that's what I think his goal was to begin with, so in the end everyone contributed.

Isn't that what F-chat is about.