For many, few things can match the allure of driving a new luxury car. The thrill of being behind the wheel of a brand new Ferrari, Lamborghini, or BMW is, frankly, too good to pass up.
However, there are two unique distinctions to make when considering fueling this passion. One, what are the pros of leasing exotic cars over purchasing them? And two, who is this passion really for?
In this article, we’ll explore both, as well as guide you through the most common concerns, terms, and questions on the subject.
Frequently used terms to know when leasing exotic cars
First, as with all such transactions and agreements with specific terminology, you should know some frequently used terms when leasing exotic cars.
Manufacturer’s Suggested Retail Price: Commonly abbreviated as MSRP, this is the manufacturer’s suggested retail price – as the name implies. This will dictate the full cost of the new car, as defined in your lease agreement. It is noteworthy that this is negotiable.
Capitalized Cost/Cap Cost: The former is the standard form of the term, while the latter may be used colloquially. Otherwise known as the lease price, this is the starting value your leasing agency negotiates down from the Manufacturer’s Suggested Retail Price.
Capitalized Cost/Cap Cost reduction: This is a potential reduction to monthly payments based on the capitalized cost you agree to. This can be a down payment (see below) or a trade-in.
Down payment: This is an up-front payment you may choose to pay to reduce your final monthly costs.
Acquisition fee: This is a standard, most often non-negotiable, processing cost fee from your leasing agency to the automaker. It is usually approximately $800.
Out-of-pocket expenses: A more colloquial term, this refers to the total amount you will need to pay to finalize the lease. It includes the acquisition fee, any potential capitalized cost reductions such as down payments, the first month’s lease payment, a security deposit (see below), and any potential taxes, fees, and other charges. For exotic luxury cars, this usually ranges between $3000 and $4000.
Gap insurance: This is sometimes referred to as a security deposit or simply insurance. Gap insurance covers serious accidents that may render the car unusable, as well as car theft. This insurance will cover the difference between your remaining lease debt and the vehicle’s value.
Residual value: This is the estimated value of the vehicle when the lease concludes.
Depreciation: This is the expected decrease in the vehicle’s value during the lease period, and is among the most crucial factors in determining monthly payments.
Payoff balance: This is the amount you will have to pay if you terminate the lease prematurely.
Mileage allowance: As the name implies, this is how many miles the lease agreement allows you to drive during the entirety of the lease period. Mileage limitations will usually vary between 10,000 and 15,000 miles per year, with 12,000 being the most frequent amount. However, the exact mileage allowance will depend on your agreement. There are penalties for exceeding it, as well as potential equity benefits in being substantially under it.
Purchasing or leasing exotic cars: who is it for
There are many profiles of individuals who share a passion for fast, luxury vehicles. Whether you’re purchasing or leasing exotic cars, a few things are likely true of you;
- You can afford it.
Both means of getting behind the wheel of the latest luxury cars require some notable financial status. There’s simply no getting around that.
- You have a passion for luxury cars, which usually extends beyond the need for daily drivers.
More often than not, such vehicles as Lamborghinis and Ferraris are not daily drivers. Rather, they’re a means to indulge in a passion for such cars, or impress one’s social circles or clients, and other such goals.
On the subject of how one might use such cars, outside of simply having a very understandable passion for them, consider the two following profiles;
- Individuals who seek to impress
Exotic cars are a timeless status symbol; there’s no denying that. Driving the latest, fastest, or most luxurious cars is an undeniable symbol of prestige.
- Business-minded individuals who seek to attract clients
A far more common profile than one might imagine, many business representatives may use exotic cars to impress existing or potential clients – usually by leasing luxury cars, instead of purchasing them. This is very common, for the simple reason that it is, in fact, effective and financially viable.
Regardless of which of the above, if any, are true for you, it should be stressed that neither purchasing nor leasing exotic cars is for everyone.
That said, the vital distinction that needs to be made is that buying and leasing exotic cars are also two vastly different practices. As such, you may also need to consider which best suits your desires and needs.
The pros of leasing exotic cars over buying them
As leasing is a very common suggestion, let us explore the actual pros of leasing exotic cars over buying them.
Leasing is more affordable than buying
Monthly payments will never match the retail price of the car you’re leasing, even including out-of-pocket expenses. As such, you will get a much better car for the same investment.
Furthermore, there is no non-negotiable down payment. You may thus opt for a very modest down payment and have the rest roll into monthly payments so that your expenses remain more manageable.
Conversely, you may opt for a more sizeable down payment instead, if that fits your budget better, and have lower monthly payments.
Finally, your monthly payments will take depreciation during your lease into account. This factor of such an investment would otherwise burden you, but a lease circumvents that.
Therefore, you can have more flexibility when managing your capital, and the freedom to potentially invest it elsewhere.
Leasing enables variety
Luxury car enthusiasts often appreciate variety, and can thus enjoy it as one of the pros of leasing exotic cars. Such cars are usually not daily drivers, but luxuries – as the name implies.
Leasing allows you to enjoy your new car for a few years and then get a new one, instead of binding you to an aging, depreciated model.
Furthermore, an ever-present warranty is unquestionably among the pros of leasing exotic cars. If worry-free driving concerns you, you can rest assured that most new cars’ warranties extend past your lease period.
As such, you will enjoy all the benefits of regular maintenance, as well as a warranty against reasonable damage. Should you lease a new car once your previous lease expires, you will have a new warranty protecting you.
Fewer taxes and tax write-offs
While it’s advisable to always consult your financial advisors or accountants for matters of taxes, one of the pros of leasing exotic cars is that it can actually entail such benefits.
Leasing a car for business purposes can entail tax write-offs, as long as you’re self-employed and drive to and from places of business. Furthermore, monthly payment taxes are, in most cases, much lower than a single sales tax.
No hassle afterward
Finally, when leasing exotic cars, you don’t have to shoulder any burden afterward. Where a purchased car would depreciate over time, lowering the value of your investment, a lease saves you from it.
What’s more, you won’t have to go through the hassle of having to sell or trade your depreciated vehicle.
The one downside of leasing exotic cars: lack of ownership
While many other downsides may be situational or too minor to be deterring, there is a single, notable downside to leasing over buying. Namely, leasing a car does not provide ownership; you must return the vehicle when the lease expires.
There are quite a few benefits to car ownership, as one should expect. From emotional attachment and the reassurance of ownership to a lack of mileage restrictions and the potential long-term financial burden, some do prefer to buy instead of lease.
Older models may actually see appreciation as opposed to depreciation over time, in which case ownership is both valuable and lucrative.
However, as outlined above, buying and leasing cover different needs. Ownership prevents changing to newer models every few years and presents financial challenges such as depreciation and taxes.
Therefore, you should likely weigh the pros and cons of each when making your choice, instead of making hasty decisions.
Transporting your leased vehicle
Finally, especially if you frequently travel for personal reasons or business, you should take care of transporting your leased vehicle. While modest distances are manageable, interstate travel may be more challenging and demanding.
For one, you need to ensure your car reaches its destination easily and safely since your warranty will likely not cover unreasonable damage. Furthermore, you may prefer not to drive your car across the country yourself, not to exceed your lease’s mileage allowance.
As such, many would strongly advise employing trained professionals to transport your vehicle for you. Fortunately, moving companies and relocation experts abound in the US, and they can handle both your vehicle transportation needs and any business relocation demands.
Frequently Asked Questions
Finally, for your convenience, here are the most frequently asked questions as regards leasing exotic cars.
Q: What documents do I need?
A: While slight variations may exist among dealerships, and the advent of COVID-19 may affect the process, you will need to provide the following documents or certified copies thereof:
- Your (valid) driver’s license and insurance card
- Recent pay stubs – usually the two most recent ones suffice
- Proof of residence and trade documents (eg. Registration forms)
- List of references
Kindly note that, as with other contexts, your list of references cannot include members of your household.
Q: Can I lease an exotic car in my business name?
A: Yes. The vast majority of dealerships allow leasing cars in your business name, as it is a frequent practice. Of course, you should still make sure that the dealership you choose allows this service beforehand.
Q: Are down payments required?
A: Not necessarily. Down payments usually vary depending on the dealership in question, as well as the client’s credit rating and the type and price of the vehicle in question. Many dealerships offer zero-down lease deals, rolling the down payment amount into monthly payments.
Q: Does leasing exotic cars come with maintenance fees?
A: In most cases, no. Most dealerships offer free maintenance services, including tune-ups, oil changes, and service intervals. Such services should suffice for standard maintenance and servicing. However, exact maintenance fees may vary between lease agreements.
Q: Where should I return a luxury vehicle?
A: Typically, all leased vehicles are to be returned to the dealership or leasing agency from which they were obtained. However, many lease agreements allow you to return leased vehicles to different branches of the original agency or even other authorized dealerships. You can even contact the professional moving crew from All Season Movers to transport your car to its destination if it needs to be returned to a distant location. On the whole, returns may be assessed on a case-by-case basis, so be sure to carefully read your lease agreement.
Q: Are leased luxury vehicle deposits refundable?
A: Not necessarily. Typically, leased luxury vehicle deposits are refundable when the lease expires. However, this strongly depends on individual lease agreements; some even state that deposits are not refundable at all.
Q: Are there mileage limitations?
A: Yes. In the US, federal standardization requires that leases come with mileage limitations. While exact mileage limitations will usually vary between 10,000 and 15,000 miles, 12,000 miles per year are usually a good frame of reference. Furthermore, while mileage limitations will vary, some dealerships offer agreements wherein mileage charges are waived.
Q: Are there any penalties and charges in leasing?
A: Yes. Penalties and charges are specifically defined in agreements and the most frequent actions that may incur either are early contract termination, unreasonable damage to the car, and late monthly payments.