The Rules of Exotic Car Financing
With the recent announcement that Porsche Financial is now going to be offering Lamborghini programs, I wanted to take a few a minutes to answer the question:
What does it take to finance an exotic car?
I get asked this almost every day. Most people assume that all of our deals are done with briefcases full of hundred dollar bills but in fact, over half of our Lamborghini deals involve some form of financing. Today, interest rates are low, terms are good, and banks are getting more eager to add some high dollar car loans to their portfolios. Even if you can afford to pay cash for a car, it usually makes sense to explore financing options so that you can keep your money invested elsewhere.
If you would like to purchase an exotic car and use the financing resources that we have available, here are some general rules to expect:
- Have a 20% down payment available. Some banks require at least this amount but regardless, it is a good idea to have this amount to put down. That will give you a good equity position in the car from day 1 and help to keep rates lower.
- Be able to prove your income. This can be done with a pay stub or a tax return. We do not always have to provide proof of income (POI) but at times it is required and it is best to have it available before we start the process.
- Have a debt to income level under 45%. This means that the sum of all monthly debt obligations should be less than 45% of your gross monthly incomes (prior to any withholding). This will include your mortgage payment including escrow payments, 3% of any revolving balances, the new car payment, and any other car payments.
- Credit score > 700. Your credit score is not the most important factor in determining whether or not you can buy an exotic car. You can have an 820 beacon and not be able to buy anything and we can sometimes get a deal done for someone in the mid 600’s. It just depends on how the whole deal picture looks. In order to get a bank’s lowest rates, you will need your score to be over 720 or 740 depending on which bank we use. Anything over that doesn’t really make any difference.
- Prior loan experience. Most banks do not want to start you off with a $100k loan. In most cases, banks will approve 50% more than the highest car loan you have had previously.
- Loan Amount < Gross Annual Income. Most banks will not loan you more money than you make in a year. That means that if you make $120k per year and want to get a loan for $100k, it is pretty easy. If you make $100k per year and want a loan for $120k, it becomes more difficult.
Now obviously none of these rules are set in stone but if you meet each of those requirements, we can get you financed. If one or two are a bit fuzzy, there is still a very good chance and we have strategies to work around that. Let me know if you guys have any other questions about this. I will put up a few more posts about exotic car financing this week.