To succeed in this market, a lease provider first must have a comprehensive understanding of current and projected market values for a very broad range of exotic and vintage cars. (This capability alone distinguishes them from traditional lenders and leasing companies.)
Secondly, these lease providers must be capable of making financing decisions very quickly, in minutes and hours, rather than days or weeks. And most importantly, they need to make convenience and client service a priority; beginning with a fast and highly secure online lease application process featuring electronic signatures, and personalized attention that ensures flawless execution of every detail in the car acquisition process.
There are tangible tax advantages. Even for wealthy individuals who can comfortably write a check for an exotic or vintage car, the sales tax on that purchase in most states can be onerous. In California, for example, a $3 million Ferrari will generate an addition tax payment to the Golden State of nearly $300,000—with no subsequent sales tax credit to offset that hefty upfront expense. With a lease arrangement, however, in most states those state tax payments are calculated on a pro rata basis, paid according to the monthly lease schedule. This provides the car owner with use of that unpaid tax money over the term of the lease.
The other potentially significant tax-related benefit involves the ability to lease an exotic or vintage car in a business name, (and not necessarily a corporate entity), allowing the lessee to use pre-tax dollars to make lease payments. If justified, in terms of how the car is used to gain or maintain business prospects or customers, this can represent a substantial financial benefit.
Leasing can benefit serious car investors. There are no guarantees that exotic and vintage cars will appreciate in value, but they can and frequently do. A wealthy enthusiast or serious collector who purchased a 1960s-era Ferrari 250 GT SWB for $3 – $5 million six or seven years ago saw the value of that car appreciate to $8 – $12 million recently. Conversely, there are sad stories of exotic cars that have lost value on a similar pace and scale.
Among the wealthy, there are some individuals who are extremely knowledgeable regarding current and anticipated market values of particular marques; who know what to look for and what to avoid in a specific car; and who have the financial means to buy and hold cars for the long term, regardless of market fluctuations. These sophisticated collectors should not overlook the advantages of leasing, versus outright purchase, either to finance an individual car, or to own a portfolio of “investment” vehicles. Rather than spending $3 million to purchase a single vehicle, for example, a collector can apply those funds to create a portfolio of 3 or 4 high-potential vintage vehicles. This strategy serves to retain the use of capital, maintain ownership of multiple cars, and thereby increase the payoff if their market price projections are correct.
Confidentiality is the top priority. As most wealth advisors know, and as specialty-leasing providers understand, privacy and confidentiality are top priorities for their wealthy clients. In many cases, for example, owners of exotic or vintage cars will value discretion and trust even more highly than interest rates in selecting a lease provider.