The financial reality of Ferrari ownership...

Agreed, it's a bit off topic but if somebody divulges an iron clad plan to get 30% returns, this would then be the last of the "cost of ownership" threads

 

The total goal here is :

* Home paid of off no mortgage
* 2nd vacation home paid off

*A nice rental property like a 10 unit not too much of headache to run bringing in 12k-15k monthly

* 1.5-2mill cash in bank liquid (shakedown and kidnapping money )

* 250k in agrresive stocks

* 500k in A Rated bonds

* A nice food business to write all interest off like a pizzeria or sandwich shop in a building owned of course =) where you have a nice trust worthy crew running it (where you can walk in a take money out the register whenever you want

* boat paid for
* ferrari paid for

PS : I WISH !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

 

Im almost gettin there ...rough road tho lol ...

 

The conversation needs to continue in the "Business & Investment" forum.

Stay on topic please.

 

Well that helped...

 

A shot at drawing back closer to the primary topic. Anybody here have experience with leasing Ferraris versus financing, and just trading it in every 5 years? Has anybody found that to be good value?

From what I know, a Ferrari California lease would probably run around $3k/month, so $36k/year for the rest of your life to always have a modern model Ferrari under warranty and no initial capital down, does that seem reasonable taking into account the cost of capital?

I would be curious to find out if many people do that, and whether that ends up being financially advantageous.

 

Are you asking about new vehicle leasing through the dealer, or using an exotic/collector lease company like Premier to acquire a used vehicle? With some companies like Premier, Putnam and Woodside, there is typically no "trading it in" option at the end of the lease of a used vehicle. To quote directly from Premier's website for example,

"Lease Expiration
When your lease expires, you have four options:

1. Pay the residual and own the car outright.
2. Sell the car, pay the residual, and keep any difference.
3. Trade the car into a dealer who pays the residual, and you keep any difference.
4. Refinance the residual through a new lease without a large cash outlay and continue to own the car."

 

talk about a thread jack. I read the first few pages...then skipped ahead and wondered if I was still in the same thread...

I just wanted to say "thanks" to the owners for providing their financial reality check. I've accomplished a lot of goals (Harvard grad, PhD, business owner...) and while I just purchased a 2008 Viper it looks like the F-car is still a ways off (F355 is still my all time favorite supercar). Honestly, truly, thanks for saving me the headache. I've been very impressed with the owners on this forum. Very, very impressed.

 

I'm talking about new vehicle leases from the dealers.

From what I've heard, Ferrari does essentially all open-ended leases, so at any point during the lease, you can:

1) buy out the car yourself at the lease residual calculator for that length of time into the lease and pay the sales tax on the remainder of the vehicle's price
2) trade the car in at any time back to the dealer, no sales tax owed on the remainder of the vehicle, and either use the credit for the purchase of a new car, or collect the difference between market value of the car and lease residual value.

I'm thinking this actually is not a bad way to go, given how well Ferraris have held their values over time (exception for the Scuderias, poor souls).

Consider if you bought a 2010 Ferrari California. Waited your 6 months or whatever to get it built, and start paying your $3k/month. Keep the car for 5 years, so until 2015. Lease residual something like 50%, so $115k or so. By then you've paid out about $180k in lease payments, and you trade the car in. I would imagine by then, the car would be worth a touch more than $115k, maybe $140k given how well they've been retaining their value.

So what's the total cost of ownership? Let's compare it to paying all in cash, and then selling at the end. All under warranty more or less, so $180k-($140k-$115k) = $155k. Then you take into account cost of capital, so that's $230k + tax that you'd normally be financing, so in CA that's $250k roundabouts. 5% interest, so $12.5k/year over 5 years. So now we have $155k-$62k = $93k in exchange for 5 years of ownership of the vehicle.

If we paid all in cash, then we pay the $250k upfront, sell in 5 years for $140k, and lose $110k total.

So by leasing, you save yourself almost 20% off the actual cost of ownership assuming a cost of capital of 5% and a 5 year depreciation of $90k.

Thoughts? Did I miss something in the calculation?

 

OK, cleaned out most of the off topic stuff, will get more later.

If you want to talk Business and Investement, subscribe and post those comments in that section of Fchat. Thanks.

 

I too am wondering if evo ever got that Ferrari, and if he's still making 1mm a year . My advice to him would have been to save/invest as much as possible for the first year and then loosen up and have some fun if the income remained that high.

I'm a car nut and have wanted a Ferrari since I was a kid, and slowly but surely I've been checking off boxes that in my head will help me justify spending big money on the car of my dreams. I plan to pay cash, as I subscribe to the theory that if you can't pay for it up front, you probably shouldn't own it in the first place.

I'm looking at getting a low mileage 08 430 coupe, hopefully in the 150k range. It's the car I love, and from what I hear from my two friends who own one, they don't require much in the way of annual maintenance. I plan on budgeting 5k/yr for maintenance, hopefully that will cover things for the 4-5 years I plan on owning it (at which point I will trade it in for a 458 for around that much $$...).

My checklist:

-old CC debt paid off... done
-School loans paid off... done
-6 month emergency fund... done
-DDs paid off... done
-House paid off... done
-Kids 529 account filled to 100k each... getting there, they are around 25k
-Investment income paying 50k/yr in case all goes to heck w/the job... it's at 30 now, need another 225k or so invested @ current yield to be at 50.
-Cash to pay for car and vacation/shopping spree for wife... next

My salary isn't huge, although at work we sometimes have good years and profit sharing kicks in, which often pays several multiples more than salary. I'm hoping the next time that happens will be this year and I'll be able to top off those last 3 buckets, so far things are looking promising

 

Your math is basically correct but, simply put, what you're saying is that the big advantage comes from avoiding tax on the lease. Is it true that there is no tax at all on the lease?

Your calculation begins with a 20k difference in the price paid for the car (250k cash vs. 230k lease).

At the end, you arrive at, surprise, a 17k differential in the 2 approaches.

 

but just on the portion of the car consumed each month. or tax on the payment only.

 

You do pay tax on the lease, but the tax payments are deferred, and only paid on the depreciation that is taken during the course of the lease. The $17k differential being close to the 250k vs 230k prices is just a coincidence, given that the lease is still really $240k or so due to tax payments.

 

"Dirty EVO" - the guy making $1million per year and not sure he could buy a Ferrari....

probably did not. His last post was Nov. of '08.

 

Or maybe he's too busy driving his Ferrari to post on the board

 

I guess i am high income "another toy" group, but I am possibly also somewhat eccentric in that the "dream home" means nearly nothing to me. Houses are work. I have a nice enough suburban house with a 4 car garage next to family (I have an 11 year old son, who I have custody of, but his mom, her husband, and his 3 half brothers live 2 blocks away and I thought he should live by them) and a 2 bedroom condo in another city where I sort of live a split life.

I rent a garage from the landlord of my first business to park the overflow of cars in, and leave one or two sitting at a friends aftermarket car business for free advertising for his shop in exchange for careful parking much of the time.

Cars make me happy. They smell cool, they make noise, they make more noise, they make your heart thump and make you feel like a 10 year old boy who just got a bb gun for his birthday, and they also make noise.

Houses involve contractors and are a pain in the rear end. And no matter what anybody wants to STILL say (I have realtor friends), they never really were a good investment in a typical case. A good savings account if one lives there for a long while and are paying a mortgage, but a good investment, no.

I am financially thrifty and prone to saving almost all of my money and investing it,, this probably a function of living below the poverty line the majority of my life, and wouldn't make a significant financial sacrifice to own any car or house.

But to each his/her own, ... and you only live once. When you are an old man, would the several million that the $1-300k of a Ferrari now be worth more or less to you than the memories (whatever they will be) of having that car now when you are younger, better looking, and probably still have some single friends to go chase girls with.

I say this most seriously indeed, as this post is written by a guy who gave up life after his early 20's to work 100+ hour weeks and have NOTHING, and now in my mid 30s I guess I can have whatever I want.

What, when I am a tired old man, will have made me happier? 40 years of having all the toys and stuff, or those 10 years when I was most handsome, most energetic, all my friends were still single, and stuff?

There is absolutely no way to know, and I chose my path after becoming a parent and cannot un-choose it.

So choose wisely, and remember from someone who knows that a lack of money is a sure-fire breeding ground for unhappiness, but also remember that money isn't everything, its just one thing.

 

and money is worth no more than what it can buy you. But "stuff" is worth no more than the memories, quality, and joy it can bring to your life.

if you had $40B but had to drive a lincoln town car around and live in the same house for 50 years, would that really be a good deal?

but if you bought a car and wound up miserable as a result, worrying about the car and its resale, not wanting to drive it for fear of depreciation, would that really be a good deal?

See what I mean?

 

These lines actually brought a smile to my face as they're exactly what I believe as well

 

I fit somewhere between the top two groups. I own two homes and four cars...a 360, new Pcar and two turbo subarus. We also have a boat at the lake house.

I could buy a new Cali and pay cash for it. Drove it and it wasn't quite as much fun as my 360 Spider. So why pay ~$150k for a car that really is not as much fun to drive?

The top group could pay a million for a car IMVHO and I would not be comfortable with that. I have no debt and sleep very well at night. Having a million dollars tied up in a car or cars would bother me.

I am now retired. The kids are all through school and have good jobs. They should be able to fend for themselves.

We can travel when and where we want and stay where we want. So life is good. No worries really as long as we have reasonably good health.

Bought my first Fcar when I was still working and was 55. Paid cash. It was a used 355 F1 GTS. It was great but I like the 360 Spider better. So far I haven't found a car that interests me enough to replace the 360. To me a sports car has to be a convertible which limits my choices. And I am pretty much locked in to one car has to be an Fcar. Our other sports car is Boxster S which is really my wife's car...in the summer her DD but I drive it on trips (more storage space than the 360). works for us.

 

cool, man

 

I have owned a Ferrari at 23 and 41 and every year in between. At 23 my 308 GTBi was 50% of my salary. I also had a Porsche 944 and 3x motorcycles, all paid for out of my modest engineering salary. I rented a room and a covered parking space. Real-estate just did not interest me at all. The Ferrari purchase had a direct impact on my finances.

Fast forward 18 years.... ...14 of which I managed to stay single and kidless.

Now I am married, 2x kids, very successful, maybe this year I will be one of the 1m guys if I am lucky. But I still love and respect and enjoy my Ferrari the same as I did when it consumed my income.

Feel free to try and put a price on 18 years of Ferrari / Porsche ownership?

DONTS:
-Dont put yourself in a financial position (car, house CC, etc) that will reduce your enjoyment of life.
-Dont believe that cars are investments. All cars are depreciating assets. Recently someone pointed out that some old shelby mustang that sold for like $4K in 196x was now worth $60-80K, yes but that money invested would be worth much more. (lets ignore CPI, maintenance, restorations, etc)

DO:
-Enjoy life NOW.
-Leave your kids NOTHING. Spend every penny before you die. I dont want a penny from my parents when they pass. I recently told my mother this very fact, and she went out and bought a bright red Z3, and has been smiling ever since. People just assume leaving your kids "something" is important. Why? Making your own way in life is very important.
-Dont save everything for retirement. Save enough to travel and enjoy life, and not be a burden on your family or society (aka Me).
-Everybody says "...you cant take it with you.", really? What if they are wrong? You show up to the pearly gates and the guy in front of you glances back and says "Wheres your stuff?" ...oops.
-Drive a sports car when you can ingress and egress without looking silly. Also feel free to drive a sports car later in life, I intend to. The point is not to save, save, wait, wait.

Its perfectly healthy to spend money on cars or whatever else makes you happy even though in the end you will only have the memories. That is all we get from vacations apart from a sunburn. You travel, spend, spend, spend, and in the end you have some snapshots and the memories.

Here are some snapshots to illustrate the non-financial reality of ferrari ownership.

Trent
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Long time lurker and 360 owner. I'm not sure what group I fall into and would invite your comments on how others think I'm doing - I always find constructive advice useful.

I'm 28 and run a small company. It makes around $350-400K net profit a year. I pay myself a "modest" $60K per year. I have no debts (business or personal) but only modest savings of around $20K. I just started a pension though and plan to put in around $40K per year.

I started wanting a 360 2 years ago and could afford one but wanted to wait until it wouldn't feel like it was "denting" my finances. So I bought a Mercedes CLK (still own that) and bought my Ferrari earlier this year for around $70K (a black spider). I'm the kinda person who only pays myself when I have to each month and prefer to leave money in the business - but thankfully I have money available if I do get any awful repair bills.

My wife and I have been renting an apartment for a year as we intend to move to another city in 2 years. With property being what it is I prefer to keep money within my business and didn't want to be in a situation where we couldn't sell in 2 years. I could buy a "fixer-uper", spend some time/money on improving it and sell for a profit in 2 years, but right now, the time involved doesn't interest me as much as business. I'm working on some other business ideas and prefer to also invest in these with the possibility of a big payoff in 2-3 years that I can then use to buy a dream home. If none of the ideas work, I still have the income from my main business to buy a lesser home with, providing I keep my eye on the ball.

In some ways I feel like a phoney for buying a Ferrari before buying a home AND because I'm not a wealthy person yet, but renting works right now. Am I crazy for buying a Ferrari? I don't think so.. even more so for the fact that depreciation on the 360 is shallow now and I shouldn't have lost nearly as much over a year as a brand new $40k car would have.

I agree with the "memories" comments and can always say I bought a Ferrari and enjoyed it in my 20s before kids. The thing that keeps me up at night isn't owning a Ferrari, it's getting the work/life balance right. I'm trying to delegate more, cut back on hours and make a little less each year with my main business to get more time with my wife, but it isn't easy - especially with other ideas I want to work on. At the end of the day, we won't regret not working more at the end - we'll regret not having spent more time with family as this is what its all about.

 

It sounds like you are in good shape. The one question/point I would make: You own a company with NET profit of 350-400K. This sounds like a corp since you list how much you pay yourself. Assuming you have been in business for a few years you have a large stockpile of cash, well over $1M, sitting in the corporate accounts. Maybe you meant gross not net; otherwise you would feel wealthy. $300K+ net is wealthy. Maybe not Gates wealthy but wealthy.

Either way it sounds like you are headed in the right direction. Enjoy the cars and good luck with the business.

 

Yes gross (my mistake) so around $250-300K net (after taxes). This is corporate profits though. I pay myself $70K dividends, which equates to about a $100K salary after taxes. I try and stick to living like I'm on a $70K salary and waited to buy my Ferrari until I could feel comfortable paying cash.

Company has been going at this pace for not that many years so we have a bit less than what you suggested in savings and stock. It's doing ok, but I'm working hard to get another 0 or two on the end of all these numbers with expansion and other ideas.

I don't "feel" wealthy and think I'll only get that feeling when I have enough in the bank never to work again if I didn't want to and I'm nowhere close yet. I found I don't want as many luxury items now I can afford them as I did when I was in college. This is more info than me and my financial advisor knows but this is the power of the internet in sharing stuff anonymously!

Most tricky thing I find is not having peers as a yardstick as you do in a job (everyone is very secretive and it's not as easy as comparing yourself to a colleague for example), so you have to trust yourself. I always end up thinking "I could lose it all anyday, so be careful and keep your eyes on the ball". Maybe thats too gloomy but I tend to think worst case scenario just incase.

My Ferrari is by far the most expensive thing I've bought. I could possibly be driving a 430 or even 458 on finance but I can't stomach the loss in value and interest on the loan just to drive the latest thing.