Am I right in thinking that .....

[J.P]

....the reason alot of the Ferrari range have multiple owners is that they purchase the car on finance and then before the balloon payment is due, move on to something else - as some of the final payments are quite hefty ??

Or that they are in the fortunate position to be able to chop and change as they pls and are finacially savvy enough to work the system to their benefits ??

I ask this as I always thought it was a good idea to either fund a purchase by saving or a loan - that way if you need the spondoolies quickly (and opted for the loan) you can sell the car and have the cash, as opposed to handing it back to the finance company and taking a hit.

This maybe a bit of a noddy question, and reading the posts there have been alot of chatter about financing cars, but I am not what you would class as a financial whizz, and was just curious...

Thanks..James

[GI Jnr]

J.P said:

....the reason alot of the Ferrari range have multiple owners is that they purchase the car on finance and then before the balloon payment is due, move on to something else - as some of the final payments are quite hefty ?? Or that they are in the fortunate position to be able to chop and change as they pls and are finacially savvy enough to work the system to their benefits ?? I ask this as I always thought it was a good idea to either fund a purchase by saving or a loan - that way if you need the spondoolies quickly (and opted for the loan) you can sell the car and have the cash, as opposed to handing it back to the finance company and taking a hit. This maybe a bit of a noddy question, and reading the posts there have been alot of chatter about financing cars, but I am not what you would class as a financial whizz, and was just curious... Thanks..James

The other scenario is that people buy the Fcars and realise that they can't afford the running costs and jump ship before the servicing/cambelts are due.

With regards to financing, providing you do it responsibly, I'm all for it. I'm not a big fan of buying cars outright and having all of my capital tied up in a depreciating asset. I'd rather commit as little as I can and have the capital outperform the finance costs in accounts and investments etc...

But buying outright works well for people also, it's very much personal preference.

Tuan

[angelis]

And then there are the people who buy in Spring and sell when summer is over.

Little depreciation and no servicing costs.

[J.P]

Hi Tuan,

So I guess what your saying is that with the correct investments (and capital built up over the years), the returns on this cover the financing of the the car until the balloon payment is due.

Do the finance companies get all fussy if you do this (i.e only financing for a short amount of time), and do you take much of a hit either by returning the car to the finance company for them to value or by selling it yourself ??

Hi Angelis,

I never understand why someone would buy such a nice car for such a little amount of time, with all the hassles of insurance and finance etc, but I guess its all down to personal preference in the end.

I just wanted to make sure I wasn't missing the big picture

Thanks James...

[bertie]

GI Jnr said:

I'm not a big fan of buying cars outright and having all of my capital tied up in a depreciating asset. I'd rather commit as little as I can and have the capital outperform the finance costs in accounts and investments etc... Tuan

I'd love to know where or how you can achieve capital growth which would outperform the depreciation of the asset.

From my expierance newish Ferraris loose approx 15% per year and I'd love a few investments which made over 15% a year.

I'm not being funny here, I really would as I always have the same dilema and end u[ concluding that outright is the solution.

[italiano]

Hmmm, I always buy my cars outright too.

My theory is that whatever you pay finance is a composite of depreciation,interest and profit margin and therefore unless you can match the interest and profit margin through alternative investment, it's an expensive way to buy. Needless to say I haven't found that investment yet.

Having said that, finance is a great way to know your exact costs each year.

[GI Jnr]

James,

J.P said:

Hi Tuan, So I guess what your saying is that with the correct investments (and capital built up over the years), the returns on this cover the financing of the the car until the balloon payment is due

In a way. Look at it like this: You're after a car for £100k, and you have £100k in the bank.

Option A: Buy outright. No fuss, no finance, no hassle.

Option B: You put a £20k deposit down and finance £80k at say, 5.5%. You take the other £80k and invest it. You then use the capital to pay the monthly repayments (eg, £700 per month). Just a long as your capital invested performs by more than 5.5% (what you’re being charged for the finance), it’s the same end result as Option B.

Costs to you after 1 year: Option A = £100k plus depreciation. Option B = £28,400 plus depreciation.

Costs after 2 years: Option A = £100k plus depreciation. Option B = £36,800 plus depreciation.

It’s no different form these people who surf 0% credit cards and have the money in the bank.

J.P said:

Do the finance companies get all fussy if you do this?(i.e only financing for a short amount of time)

Not at all. If anything, they like it. A higher turnover of business. What I do though is go for the longest term I can to reduce the monthly repayments. The agreement will have some form of penalty, but it’s normally something like 1% of your balloon after the first year. (using the example above, that’s £800, whoopee doo when you’re talking about a £100k car) Again, I do this to keep my capital in my pocket.

J.P said:

and do you take much of a hit either by returning the car to the finance company for them to value or by selling it yourself ??

Depreciation’s depreciation. I tend to P/X to a dealer and let them just sort it out. When I chopped in the 355 for the 360. My total investment of energy was to give them my target monthly repayment, and three signatures.

It’s also a good negotiation tool as the dealer will get commission from the finance. I’ve found that in today’s world, cash is no longer king. In my experience, they’re more likely do a better deal if they know there’s a few grand coming from the finance company.

J.P said:

I never understand why someone would buy such a nice car for such a little amount of time, with all the hassles of insurance and finance etc, but I guess its all down to personal preference in the end.

It is. And the above it my personal preference. It obviously shouldn’t be taken in any way as advice. Works for few, not for many

Tuan


>> Edited by GI Jnr on Tuesday 14th June 13:50

[chuck_ster]

Remember that your invested capital has to have a return of more like 9.3% to cover finance at 5.5%, after all you will be paying capital gains at 40% on most investments..especially short term ones.
Cman

[GI Jnr]

bertie said:

GI Jnr said: I'm not a big fan of buying cars outright and having all of my capital tied up in a depreciating asset. I'd rather commit as little as I can and have the capital outperform the finance costs in accounts and investments etc... Tuan I'd love to know where or how you can achieve capital growth which would outperform the depreciation of the asset.

With this comment, I wasn't factoring in depreciation. Very few people are in the car game to make money, just lose it as slowly as possible.

bertie said:

From my expierance newish Ferraris loose approx 15% per year and I'd love a few investments which made over 15% a year. I'm not being funny here, I really would as I always have the same dilema and end up concluding that outright is the solution.

My, and a good few number of my client's have portfolio's that have grown by 12%-18% for the last three years in Low to Medium Risk portfolios... It can be done. But it involves taking a risk.

My views are very much in the minority, but the concept of "gearing" does work for people with the inclination and stomach for it.

Though, having said all of this: each to their own.
Tuan

[bertie]

GI Jnr said:

My, and a good few number of my client's have portfolio's that have grown by 12%-18% for the last three years in Low to Medium Risk portfolios... It can be done. But it involves taking a risk. Tuan

My portfolio lost me about 12% in a medium risk balanced approach over 5 years, never stopped the management company taking their percentage every year though.

Personaly I'm well glad to be out of it at the moment as I can't see it doing anything spectacular in the near future, so I'm back to thinking cash (or maybe property) is king!

As you said though, it's a personal choice and it must work for some I guess.

Sorry for going off thread!

[GI Jnr]

bertie said:

Personaly I'm well glad to be out of it at the moment as I can't see it doing anything spectacular in the near future, so I'm back to thinking cash (or maybe property) is king! As you said though, it's a personal choice and it must work for some I guess. Sorry for going off thread!

Don't apologise, opposing views are interesting to know.

You're right, shortly of another bout of world catastrophes, nothing big is expected.

I like property too, but I've spent all of my money at the mo on stupid combustion engines!
Tuan

[splodge s4]

GI Jnr said:

I like property too, but I've spent all of my money at the mo on stupid combustion engines! Tuan

Property market is pretty flat, dont think much is happening to prices up or down definately this year & probley next year. With interest rates holding steady for the 10th month the average guy on the street hasnt seen any action for nearly a year, in actual fact fixed rates (which most people feel happier with) did increase & have dropped considerably in just the last few weeks. If your in for the medium to long term property is still a bloody good investment, the right property will pay for its self, it will increase value in the future & the only time you can lose is if your forced to sell at the wrong time. if your not forced to sell just keep it & rent it.

But houses are boring, cars are not.

[J.P]

Maybe we should start up a PistonHeads Portfolio, as some of the people that frequent this forum are very financially minded as to the current ebs & flows of whats good at the moment, and its not the norm to have such expertise in a somewhat confined space.

It may even kick start some people onto the Ferrari ladder.

Just a thought mind you (as I am bored), plus some people may not want to divulge their secrets without a fee - knowledge is power and all that

James..

[bertie]

splodge s4 said:

Property market is pretty flat, dont think much is happening to prices up or down definately this year & probley next year........ But houses are boring, cars are not.

Oh god no, residential letting is a pain in the arse, wouldn't touch it with a barge pole, I'm talking more industrial / commercial.

Still, you're right, it's all very flat at the moment and the returns, whilst better than the bank, are nothing to what they were 4 years ago.

Too many people gone into property that's the problem...

You can't win can you!!