How Does Exotic Car Financing Work?
Some people assume that everyone who buys an exotic car does so with briefcases full of cash. That is not really the case. We actually do a lot of financing on them. I have always financed the cars that I have purchased and will continue to do so in the future. Some people say that if you can’t afford to pay cash for it you shouldn’t buy it. That doesn’t necessarily have to be the case though. With extended terms and creative financing we can get the payment for an exotic car to a very, very reasonable level.
Let’s examine a few scenarios – Consider a $100,000 car. After doc fees, title fees, and 7% sales tax you would be out the door at $107,700.65 minus whatever you put down. For the sake of this, let’s consider $10,000 down.
There are a variety of ways to go about it. The first option is simple interest bank financing. Most banks will loan money for 72 months on an exotic and they tend to be pretty generous with their book values. This means that you do not have to put much money down in most cases. 5-20% down is usually what they look for. For a car that is less than 4 years old you can probably get 4% financing with good credit. That would make your payment $1,528.54.
The second option is open ended leasing. There are companies such as Putnam Leasing or Premier Financial that set up leases on these types of cars. Now this is not like the lease on your BMW that you get to turn in after 39 months. They set them up as 60 month leases and the residual (35-50%) is due as the 60th payment. These are easier to get approved and they have a greater ability to make more difficult deals work. They do carry slightly higher interest which is usually 7-8%. On these leases, the tax is not charged up front but is charged on each payment. In this scenario with $10k out of pocket, your monthly payment would be around $1,406 + tax. Sometimes these deals will have pre-payment penalties so it is worth consulting a dealer before pursuing them. Despite the few drawbacks, though, it can be an excellent way to own an exotic.
Another option that has gained some popularity over the past few years is long term financing with Woodside Credit. This company offers 84, 100, 120, and 144 month financing. Obviously that makes the payment very low. When you are making such a small payment each month you have to make sure that you are buying a car that will hold its value well rather than depreciating rapidly. Woodside is strict in their requirements that you put at least 25% down, have a 700 credit score, and be able to prove your income. For the sake of this example, if you financed the same amount as the other 2 scenarios your monthly payment would be approximately $1,057 for 144 months at 8%.
There are a lot of ways to finance the cars and payments like these can make it very affordable. Shoot me an email if you have any further questions about financing a car or figuring out what you can afford.