In fiction, it was Jay Gatsby’s 1922 Rolls-Royce Silver Ghost. In real life, it’s Jerry Seinfeld’s 1986 Porsche 959 Coupe, or Mark Zuckerberg’s brand new Pagani Huayra. For the sheer pleasure of driving them, for camaraderie with fellow motorcar enthusiasts, or as an alternative investment asset class, exotic and vintage cars have long been a passion and an enduring aspect of the lifestyle for many people of wealth.

While considerable scrutiny is always paid to selection of the particular high-end marque or model that will eventually sit in the owner’s garage—a Ferrari, Lamborghini, Aston Martin, McLaren or Bentley—far less attention is typically devoted to examining the most prudent way to acquire those vehicles, either by owners or their wealth advisors.

It’s understandable why people of means are predisposed to simply write a check for a very expensive vehicle. In addition to having the resources to purchase those cars outright, there’s an emotional bias—even among individuals comfortable with margin accounts, and accustomed to complex debt investment strategies—that any form of car financing is strictly for the “aspirational” wealthy, not for those who’ve already arrived.  Unfortunately, that point of view is often fueled by ego, rather than objective financial analysis.         

Attitude notwithstanding, there are valid reasons why many wealthy individuals and their advisors don’t conduct proper due diligence when acquiring exotic and vintage cars. Notably, there’s considerable misunderstanding regarding financing alternatives for those vehicles. And the financing providers themselves, particularly leasing companies that specialize in this particular market segment, have historically done a poor job of educating prospective owners and private wealth advisors.

Exotic And Vintage Car Financing 101

The financing options for high-end cars are limited to either a collateralized loan, or a leasing arrangement. Traditional “pay to own” auto loans, through a bank or other type of private lender, are universally understood, with payment terms based on fundamental factors, including the amount financed, interest rate, duration of loan, etc. Most often, the challenge in using a traditional lender for exotic marques is based on lack of experience; their reluctance, for example, to finance a vehicle that may have been built 50 years before their bank was established.

The primary advantage of traditional loans, similar to any type of leasing, is that the borrower has access to capital that could be put to better use. Is some portion of the $12 million necessary to acquire a 1954 Jaguar D-Type at a Pebble Beach auction, for example, more effectively allocated by shorting an over-valued technology stock? Asset allocation of any type is always worthy of close examination by wealth advisors.

Understanding the leasing option for financing of exotic and vintage cars begins with this fundamental truth: that these specialized arrangements are unlike any and all pre-packaged, closed-end leases that are offered through GMAC, BMW Financial Services, VW Credit, or other auto leasing providers serving the needs of the mainstream market.

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