For far too long, leasing has been discounted as a viable financing alternative, largely because of misinformation.
For many physicians, one of life’s greatest rewards for the profession’s long hours and high stress levels involves sitting behind the wheel of a Ferrari, Lamborghini, McLaren, Porsche or other exotic, vintage or luxury car. Whether they use that car as a daily driver, or for an occasional country road excursion on weekends, most physicians who are serious car enthusiasts are less interested in the prestige of ownership, and more passionate about the visceral experience that those cars deliver.
For physicians who own, fine cars are not simply transportation or a status symbol; they’re a temporary escape into a world where they can physically and mentally engage with the engineering precision, design excellence and raw power embodied within those machines.
Most physicians are highly adept at evaluating complex financial concepts. Financial sophistication notwithstanding, the road to exotic or vintage car ownership for physicians can be confusing, and no different than what’s experienced by many first-time and even long-time owners and collectors of fine cars.
Similar to all cars, the methods of acquisition are limited to outright purchase, traditional loans and leasing. The first two methods are simple and easily understood; however, misinformation and misunderstanding regarding leasing of vintage and exotic cars (versus traditional leasing) can eliminate from consideration what may be the most appropriate financing option.
Here are five of the most common myths, lies and misconceptions regarding leasing of fine cars that physicians should be aware of:
Leasing is only for people who can’t afford to buy the car. This opinion is often driven by ego, rather than financial realities. The ability to avoid writing a large check upfront for sales tax in most states, for example, is just one of several reasons why many high net worth owners, who are capable of easily paying cash for multi-million dollar cars, prefer to lease rather than purchase.
Leasing locks you into ownership for three-five years. This might be true for a traditional lease arrangement through dealers such as BMW or Audi, but leasing of exotic and vintage cars is a unique type of business that operates differently from mass market lease providers. In fact, because most serious auto enthusiasts prefer to change cars every two-three years, lease arrangements are tailored to address that need, for example, by allowing owners to end their lease early without the penalties and fees associated with traditional lease arrangements.
Leasing is only for acquiring new cars. In fact, in the exotic and vintage car world, leases are written on previously owned cars more often than they are on new cars. These transactions are very simple: the leasing company purchases the vintage car the buyer has selected, and then structures a lease arrangement that meets their financial needs, in terms of down payment, lease payments, the car’s residual value and lease termination.
Accountants and financial advisors understand leasing. Some do, but many don’t understand specialty car leasing well enough to present a “level-playing field” explanation of leasing as a viable option. For example, many advisors don’t calculate the use of funds factor in outright purchase versus leasing; they don’t compare lease payments versus traditional finance payments; or fail to explore how the car can be leased under a business name (not necessarily a corporate entity), using pre-tax dollars for lease payments.
If a leased car’s market value declines, I’m in trouble. A reputable exotic and vintage car leasing firm knows current and anticipated car values extremely well, and will calculate a leased car’s residual value with a high degree of accuracy. While the market value for fine cars can often appreciate, there’s no guarantee this will happen. For that reason, leases are structured to enable owners not only to benefit from price appreciation but also to provide some protection from a big drop in a car’s residual value. For example, owners can refinance the residual through a new lease without a large cash outlay, and continue to own the car.
Similar to any clinical decision a physician makes, the purchase of an exotic or vintage car requires that all of the pertinent facts and evidence be examined. For far too long, leasing has been discounted as a viable financing alternative, largely because of misinformation. Although leasing may not be the best choice for every situation, it deserves serious consideration by physicians seeking the most prudent financial pathway to ownership of fine cars.
Mitchell Katz is founder and CEO of Connecticut-based, Premier Financial Services, a firm that has provided tailored lease financing for exotic and vintage cars for more than 20 years. Mitch is widely recognized within the nation’s community of serious automobile enthusiasts as a pioneer in financing, and creator of the “PFS Simple Lease,” which provides a flexible, simple, transparent way to acquire fine cars.