Negotiating with a Ferrari Main dealer

[Regy53]

In a pcp you can hand back

In a lease purchase you cannot, it’s simply a balloon payment structure to reduce your months usually 60% of the purchase price or sometimes inflated to 65%

The good thing is Ferrari are very clever with keeping there residual up , they even tell dealers used prices of cars and are audited every 3 weeks.

[chrisbell08]

LamboPH said:

Very helpful thread, and very interesting.

On a side note, could someone help with the following 3 questions?

Q1 - Can someone please explain the negative equity part of these deals?

Q2 - Am I right in saying that if your balloon is £75,000 at the end, and if the car is actually not worth £75,000 at the end, it is negative equity?

Q3 - Are most of these deals structured that you are basically just paying for the depreciation + their APR?

So I'll give you an example with some made-up numbers lol

So as an example lets say you buy a car for £100k, if you took £100k out on finance and the total amount borrowed was £115k (Purchase Price + Interest) you would be in £15k negative instantly because the value of the loan is £15k more than the value of the car make sense?

Putting a deposit down mitigates some of that risk. In the example above if you put down £15k deposit, you wouldn't be in any negative technically because the total amount borrowed is the same as the value of the car.

It gets a little more complicated because the amount a dealer would give you in PX for a car is much less than they sell it for as they need to make a profit so that £100k car may only have a dealer value of £90k.

So if you paid no deposit that £100k car would be in £25k negative instantly (because the loan amount is 115k and the price a dealer would pay is 90) .

So the idea is to ensure the total amount of money you owe on the loan is less than the PX value of the car (NOT THE VALUE ITS SOLD ON AUTOTRADER) made that mistake a few times.

[northo]

LamboPH said:

Very helpful thread, and very interesting.

On a side note, could someone help with the following 3 questions?

Q1 - Can someone please explain the negative equity part of these deals?

Q2 - Am I right in saying that if your balloon is £75,000 at the end, and if the car is actually not worth £75,000 at the end, it is negative equity?

Q3 - Are most of these deals structured that you are basically just paying for the depreciation + their APR?

This is an interesting thread! Some of the information provided isn't quite right, though.

1. Negative equity is when you owe more on the car than it is worth. Simple.

2. Yes - this is right. However, if you have chosen a PCP, you could hand the car back to the lender (provided it is in fair condition and not over the agreed mileage). With a Hire Purchase with a balloon you would have to pay the outstanding amount.

3. There has been a trend for some finance companies to keep monthly payments low for customers by offering large/ optimistic balloon payments at the end of the agreement. This tends to happen with HP + balloon agreements (you bear the risk) as finance companies don't want to be taking cars back at the end of a PCP at an over-inflated price (they bear the risk). The lower the balloon, the more potential you have for equity at the end of the agreement and interest charges will be lower. Monthlies will be higher, though...

Regulated vs unregulated

If your finance agreement is regulated by the Consumer Credit Act, then you will get a rebate of interest charges if you settle early. If it isn't, the finance company may not rebate any of the "unused" interest charges or charge a penalty (often 3-5%). So your equity position will be affected by the type of agreement you choose. If you are a consumer borrowing less than £60,260 then the agreement should be regulated and it is also possible to get regulated agreements over this amount. So you really want to be getting a regulated agreement if you can!

Example

You buy a £100,000 car and place a £10,000 deposit, finance the rest with £15,000 of interest charges and then wish to settle/ get rid of the car in month 1

Regulated agreement - you will get a rebate of the interest (less about 30-60 days worth of interest). Your deposit covers the dealer margin, so you should just about be breaking even.

Unregulated agreement - the lender could, in theory, ask for all the interest charges + the £90k borrowed. Position - less good!

This is a useful and accurate tool for calculating settlement figures on regulated agreements: https://www.magnitudefinance.com/car-finance-settl...

Rates

6.8% APR is currently a sensible rate. Coronavirus has definitely changed lenders' appetites for risk, but for "uber-prime" customers (terrible, I know) there are deals out there at 4.9%.

Rate depends on your credit profile, the type of agreement you want and even the dealer and type of car - for example, some lenders aren't so keen on supercars at the moment.

[W4NTED]

Lets make it even simpler - Using Ferrari Financial Services there is no option to hand the car back at the end. Whether it is worth more than the Balloon or less it's your problem to sell the car, pay it off and buy it or part ex it for another car. Negative equity or positive equity - its your problem not theirs.

[Taffy66]

To simplify things..
With a PCP ideally you'd want as high a GFV as possible as insurance against depreciation with the option of handing the car back.

With a lease purchase ideally you'd want a much lower balloon to avoid negative equity at the end of the term and the final payment is much less than the car's value.

[northo]

W4NTED said:

Lets make it even simpler - Using Ferrari Financial Services there is no option to hand the car back at the end. Whether it is worth more than the Balloon or less it's your problem to sell the car, pay it off and buy it or part ex it for another car. Negative equity or positive equity - its your problem not theirs.

Do Ferrari Financial Services not offer a PCP?

[northo]

Taffy66 said:

To simplify things..
With a PCP ideally you'd want as high a GFV as possible as insurance against depreciation with the option of handing the car back.

With a lease purchase ideally you'd want a much lower balloon to avoid negative equity at the end of the term and the final payment is much less than the car's value.

With a PCP, it would depend on the outcome you want. If you are definitely committed to handing the car back at the end and want low monthlies, then a high GFV would be what you want.

If you want to change your car before the end of the term (like most people) a lower GFV will give you more potential for equity when you settle early and therefore less potential for negative equity (meaning you have to wait to hand the car back if you don't want to put your hand in your pocket).

A lot of manufacturer new car PCPs (BMW/ Merc/ Porsche) have left people stuck in cars they would rather change due to the over-optimistic GFVs, which also prompted the FCA review into this type of agreement..

Edited by northo on Wednesday 10th June 10:37

[celticstevie]

chrisbell08 said:

celticstevie said:

I can confirm that - I bought a 430 in April 2019 from Wilmslow at that level

Did they move much on the asking price if you don't mind me asking? I wasn't sure how much main dealers will move on this

There were 2 black F430 coupe in stock (I have a thing for black) at the time. Both had been in from the summer of 2018. Prices had dropped from £92k to £80k. I paid £78k (probably overpaid at today prices).

Check with the main dealer if the cars are on SOR. If i'm a dealer i'm not wanting to buy but will offer SOR to hedge.
If they are then push them on price, it's a buyers market.

Wilmslow been very good with me, had a couple of issues and car was taken down on their transporter from home in Glasgow. Again they collected in winter for the annual service

[LamboPH]

Super, thanks for answering my queries :-)

[Stickyone]

Off to the Ferrari dealer today to view and drive the Cali T. Deal is sorted and agreed, just waiting to hear that finance is approved and I will be good to go.

To say, I am excited is an understatement, going to a Ferrari main dealer, is like going to the ultimate toy shop. I want to find the time to be able to look at the other cars in the showroom, I know I will be mentally planning the future upgrade to a Portofino/488/458

I went for a 3 year LP deal with Ferrari FS, with the 'standard' (not inflated) balloon payment at the end, which is around £12k less than the inflated balloon I was initially offered to keep the payments down. It means paying more per month, but I have no doubt it's the right thing to do if I want to maintain Ferrari ownership into the future. Ideally, I would like to be in a position to upgrade before the service pack and two year warranty expire, hopefully with a chunk of equity for the next one.

I'll post some pictures later if people are interested.

[Ferruccio]

anonymous said:

[redacted]

In my view, yes.
Financing a depreciating asset is something that I have never understood.

The argument made by those who do have the cash, is that they can “do so much more with the cash”. Maybe.

[dazmanultra]

anonymous said:

[redacted]

In my mind, PCP with a guaranteed balloon is like 'buying' an option to hand the car back at the end. You don't have to barter with anyone on trade in value (which is obviously a fair bit below the retail value), you don't have to weigh up selling privately vs SoR; if you want rid of the car and your equity is low then you can just hand it back at the end and walk away. If you do want the car, you can re-finance or buy outright at that point. If you do have equity in the car, you can trade it in for something else... but it's the flexibility which is nice.

The last car I bought outright (650S), I struggled to get a trade bid on when I was looking to change. Getting kicked in the nuts is one thing, but not getting a bid at all puts you in a really difficult position.

[Stickyone]

Why on finance? (I think this is a recurring PH question!)

I believe that the vast majority of people buy cars on finance, presumably because they don't have the cash (likely) or if they did, why would they drop £100k cash on a car unless they are super (cash) rich. If they don't have the cash, most can afford a deposit and a monthly amount.

I don't have £100k in ready cash, but I still want, and can afford a Ferrari, the variety of financial products out there make the car available to me. To be honest, even if I did have £100k in bank (from a pension lump sum say) I still wouldn't drop it all on a car.

[Ferruccio]

Depreciation + finance + insurance + maintenance, makes supercars an expensive passion usually.
If you can knock one of these out, it makes it a bit less costly.

[Stickyone]

Ferruccio said:

Depreciation + finance + insurance + maintenance, makes supercars an expensive passion usually.
If you can knock one of these out, it makes it a bit less costly.

Very True....

Depreciation - almost inevitable, try and buy sensibly and when the depreciation is fattening out
Finance - again - shop around, try and keep finance rate down (hence amount of interest you pay)
Maintenance - buy one with a service pack and new tyres!
Insurance - its costing me £10/month more than my previous 718 S.

[Stickyone]

Ferruccio said:

anonymous said:

[redacted]

In my view, yes.
Financing a depreciating asset is something that I have never understood.

The argument made by those who do have the cash, is that they can “do so much more with the cash”. Maybe.

A general comment (NOT aimed at you!) , but there is almost a snobbery about comments like ' if you can't afford to buy it outright, you can't afford it' . Thats tantamount to saying 'poor' people shouldn't buy expensive cars. Truth is, everyone is different and we are not all the same, what's right for one person, isn't right for another. Our financial circumstances are also very different.

PS. I don't want this thread to descend into a discussion about finance - thanks

[Taffy66]

Stickyone said:

A general comment (NOT aimed at you!) , but there is almost a snobbery about comments like ' if you can't afford to buy it outright, you can't afford it' . Thats tantamount to saying 'poor' people shouldn't buy expensive cars. Truth is, everyone is different and we are not all the same, what's right for one person, isn't right for another. Our financial circumstances are also very different.

PS. I don't want this thread to descend into a discussion about finance - thanks

Well said and congrats on buying your first Ferrari..They are stunning cars and more special to own then any other make of car including Porsches..That's coming from someone who currently own cars from both marques.

[B3NJY]

Stickyone said:

Off to the Ferrari dealer today to view and drive the Cali T. Deal is sorted and agreed, just waiting to hear that finance is approved and I will be good to go.

To say, I am excited is an understatement, going to a Ferrari main dealer, is like going to the ultimate toy shop. I want to find the time to be able to look at the other cars in the showroom, I know I will be mentally planning the future upgrade to a Portofino/488/458

I went for a 3 year LP deal with Ferrari FS, with the 'standard' (not inflated) balloon payment at the end, which is around £12k less than the inflated balloon I was initially offered to keep the payments down. It means paying more per month, but I have no doubt it's the right thing to do if I want to maintain Ferrari ownership into the future. Ideally, I would like to be in a position to upgrade before the service pack and two year warranty expire, hopefully with a chunk of equity for the next one.

I'll post some pictures later if people are interested.

Shame you have a shocking day for it, although I may see you there as my F12 is in for its service.

[Ferruccio]

anonymous said:

[redacted]

I said exactly that to a friend once whilst sitting on a chairlift.
The Dutchman sitting next to me, who believed firmly in reincarnation, told me how wrong I was.........

[B3NJY]

Had a laugh today, went to collect my F12 today after a service and saw my favourite salesman and I asked how are things, expecting the well it’s not great comment!

But by my surprise the reply I received was we’re mega busy as the guys aren’t paying 200k to fill their Yachts up so they can buy a new Ferrari instead! I need to get a new job