Bad Idea #144: 12 Year Auto Loans

[G.Irish]

I don't know how I stumbled onto this (probably while I was doing pointless supercar browsing) but I found a company that offers 12 year auto financing for buying supercars and classics. So for that $180k NSX I specced out it would be...$1756 a month. Hmm, still outrageous but better than $3479/month for a 5 year loan.

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Crazy to think there's a company that takes on risk like this but I guess if you've got money and you want to keep more of your assets liquid you might do something like this. Might also work well on the rare, high-demand cars that either don't depreciate or actually appreciate in the short term like a 458 Speciale, GT3RS, 911R, or 675LT.

Maybe if I was more financially irresponsible and had a bigger boner for supercars I would seriously think about something stupid like this for NSX or 458 but even then I don't think I could do it. One accident and you'd be more underwater than the Titanic.

[JPolen01]

I wonder what the interest rate is. Also I imagine most supercar "buyers" are leasing the cars. I would be surprised that the people who do own them would not have the cash laying around for a purchase like this. In the grand scheme of things these cars are usually not that expensive to the ultra rich that they would need the money for other things making monthly payments beneficial.

[Maengelito]

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[G.Irish]

I wonder what the interest rate is. Also I imagine most supercar "buyers" are leasing the cars. I would be surprised that the people who do own them would not have the cash laying around for a purchase like this. In the grand scheme of things these cars are usually not that expensive to the ultra rich that they would need the money for other things making monthly payments beneficial.

I think rates are 6-9% right now for that length.

Hard to say how many people are leasing supercars. From what I've seen the money factors on leases for supercars are hideous, so a lease ends up not being much better than financing. You can deduct that interest as a business expense if you use it as a "business" vehicle but I think the limit for how much you can deduct is pretty low and doesn't offset the high money factor.

The thing about people buying supercars is that it's not just the .01% buying them. There are guys out there are that are accountants, lawyers, doctors, programmers, program managers, and small business owners buying these cars. So someone that might be making $200k-500k a year might buy a Ferrari if he's got some decent net worth in his house(s).

Yeah the ultra rich guy just buys everything cash because a low monthly payment makes zero difference to him.

I could however see a millionaire using a ridiculous loan like this for something like a F40 or P1 where the car costs well over $1 million (2 in the case of the P1).

[.RJ]

https://www.youtube.com/watch?v=IJIAOosI6js

[rherold9]

Then when you end up paying 60-70% more than a 5 year car loan.....

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[G.Irish]

Then when you end up paying 60-70% more than a 5 year car loan.....

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I think it ends up being more than that, a lot more. Let's say you're buying a 458 at $200k. With a 5 year loan at 4% it's $21k in interest. With a 12 year loan, even if you keep the APR at 4%, you will have paid $52000 in interest over the life of the loan. At 6% it's $81000.

[rherold9]

So like 150% hahaha. Wow. Terrible idea.

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[BLINGMW]

Crazy to think there's a company that takes on risk like this

Sounds pretty awesome to me! I would think relatively low risk, and the car's insured, and you make 80k per car? Yeah sign me up where do I invest?

[Apoc]

People don't keep them that long... just like houses. It's a way to get a manageable payment and earn some equity during the time you actually own the car.

[WRXtranceformed]

You would have to put down a shit ton of down payment to not be upside down if you wanted to sell it any time soon though right?

[G.Irish]

You would have to put down a shit ton of down payment to not be upside down if you wanted to sell it any time soon though right?

I think they require 10-20% down. I think the trick would be getting in on one the cars like I said, where depreciation is either low or non-existent. A disaster would be to buy something like a 650S where new ones are getting sold for $100k off. In that case there's a decent risk of losing all of that equity after driving it for a year or two.

[Evan]

waitlists for ferraris are such that a lightly used one is worth more than msrp for a new one. I met a rich guy who would buy a F4whatever, immidately get on the waitlist for another one, sell the first one for more than he paid for it once the 2nd one came in. rinse/repeat.
If you dont want your cash tied up in that, these loans would fit the bill.

[BLINGMW]

I met a rich guy who would buy a F4whatever, immidately get on the waitlist for another one, sell the first one for more than he paid for it once the 2nd one came in. rinse/repeat.

G, how are you not doing this? A few of us max out home improvement lines of credit (mine is like 2% or something ridiculous), you buy stupercar #1, waitlist the next, we make a few bucks off your nonsense and get rights to pee on whatever car you have at the moment, you get fresh car for winning the Trader Joe's parking lot. Also can I borrow your car.

[Maengelito]

Also can I borrow your car.

what could go wrong? Its not like his wife is still mad at me or anything... :dunno:

[G.Irish]

waitlists for ferraris are such that a lightly used one is worth more than msrp for a new one. I met a rich guy who would buy a F4whatever, immidately get on the waitlist for another one, sell the first one for more than he paid for it once the 2nd one came in. rinse/repeat.
If you dont want your cash tied up in that, these loans would fit the bill.

Yeah I feel like there are quite a few people in that market doing that now, even dealerships. The one thing I don't have a good read on is how much these new F cars are selling for. Seems like some people are loading em up with $80k of options. At that level I would think it'd be hard to resell for a profit. But, from what I've read, sometimes Ferrari NA is pushing a bunch of options on the buyer, otherwise they may give the allocation to someone else. Don't know if that's the case for the 'regular' 458/488 but I saw people say that about buying Speciales.

G, how are you not doing this? A few of us max out home improvement lines of credit (mine is like 2% or something ridiculous), you buy stupercar #1, waitlist the next, we make a few bucks off your nonsense and get rights to pee on whatever car you have at the moment, you get fresh car for winning the Trader Joe's parking lot. Also can I borrow your car.

Well to start we're looking at a bigger house in the next year or so, so no go on supercar purchase there. Secondly, I don't think I could convince wifey to sign on to a crazy idea like that.

The other thing is, how do you get on the list for some of these cars? For Ferrari priority is given to owners with a history so off the bat that'd be tough. Maybe it would be a bit easier to get in on one of the rare Porsches like a GT3RS or whatever that mid-engined Flat-8 project is gonna be. But I imagine I'd have to put down a deposit well before the car is even announced. The idea of flipping is intriguing though, might have to do some more research.

[BLINGMW]

Well to start we're looking at a bigger house in the next year or so, so no go on supercar purchase there.

Well that's even better! Just roll it into your mortgage! :thumbup: