Exotic Cars & Normal People

Most people think that exotic cars are just for the uber wealthy, and I'm here to tell you that nothing could be further from the truth. In fact, the right used exotic car can be a BETTER investment than real estate or other "safe" investments for "regular" people and here's why:

Depreciation

Exotic cars depreciate differently than normal cars. Normal cars will depreciate until they are completely worthless. Exotics, on the other hand, hit a depreciation floor, and then only further depreciate based on mileage and condition. This is due to the fact that they are produced in very limited quantities and buyers are limited to just a few cars (of a certain make and model) on the market at one time. Certain exotics are like gold and hold their value regardless of the economy's ebbs and flows, in many cases increasing over time. This is exactly why it makes perfect sense to buy a used exotic car. Knowing how to make the right deal on the right car can afford you the opportunity to drive an exotic, and when you're tired of it, turn around and sell it for thousands more than you paid.

Financing

Money is also cheap to borrow right now. With good credit, you should be able to get a long term loan with an interest rate of under 5%, and often times with no money down. Why no money down? Because when you make the right deal, what the car books for and what you pay will be two different numbers. The bank will only see the amount you are looking to borrow. If you need to borrow $80,000 on a car the bank believes to be worth $100,000, then on paper it looks like you have 20% equity in the car. Many credit unions will finance an exotic car up to 84 months. There are also other financing options that allow you terms of up to 144 months with a 20% down payment at a 5.5% interest rate. With these sorts of financing deals, payments for an exotic car become very reasonable. In most cases with long term financing, payments can be below $1,000 a month for a $100,000 vehicle. Make sure to get pre-approved, and the transaction will go a lot smoother. Applying for a car loan is also super easy. You don't have to give your entire life history to the bank like you do when you're looking to buy a house. Now, if $100,000 sounds expensive, just know you're purchasing a $300,000 car for a third of the price...and that's a good deal. 

Choosing a Car

On to the cars... What cars are good investments? That's a pretty broad question, because there are a lot of options. Try to stay with a name brand that people recognize as iconic: Lamborghini, Ferrari, Aston Martin, Porsche, Maserati, Rolls Royce, or Bentley. Certain cars from other manufactures can also be worthwhile too, like the Audi R8 or BMW M models. Some of these hold their values better than others. NUMBER ONE RULE: If it comes with a manual transmission, for the love of everything good and holy, BUY A MANUAL. If you don't know how to drive one, learn ASAP. Manuals are getting scarcer and scarcer, and that makes them valuable.  The majority of cars produced now are automatics even when a manual option is offered.  Cars like the Lamborghini Murcielago and Ferrari F430 that are equipped with a manual transmission have skyrocketed in price because of their rarity. Roughly 5-10% of each model came with a manual transmission, which breaks down to only a couple hundred cars worldwide. You can buy an automatic F430 easily under 100k, but you won't see a manual car come on the market under $150k. This goes for other options as well. Try to buy the cleanest, most highly optioned car that you can. The more options your car has, the more attractive it will be to buyers.

Some favorites: Lamborghini Murcielago, Lamborghini Gallardo, Ferrari F430, Aston Martin DBS, Aston Martin V12 Vantage, Audi R8 V10, Porsche 911 (All came at one point with a manual option.)

Why newer cars? Well, there are actually a couple reasons. The first reason is financing. Most banks feel more comfortable financing newer cars. Now, obviously, you want to buy a car that has reached its depreciation floor, so I would recommend looking at cars that are a few years old, but really no older than 10. The other reason is purely from a technology standpoint. More modern exotics typically have lower maintenance costs and also have fewer issues. Older Lamborghinis, Ferraris, and Aston Martins can require engine-out servicing, and things like that tend to get very costly.

Dealing with the Dealer

You have to beat the dealer at his own game. If you're scared about being ripped off, don't be; just be an informed buyer. Here are the two things you need to keep in mind when buying a used exotic: Time on the Market and Condition. The bottom line is, dealers need to move cars, regardless of whether they're Hondas or Lamborghinis. When a car sits on a dealer's lot for a long time, they lose money on it. When a dealer has had a vehicle for 60-90 days, they become really anxious to move it. If they can't sell the car to a customer, they'll end up taking it to auction where it will sell at a wholesale price to another dealership. This is the perfect time for you to swoop in and make them a wholesale offer (or slightly above) that will benefit you both. The dealer will move the car without a loss, and you will be making a wholesale deal on the car of your dreams. Now, why buy a car that apparently nobody else wants, right? You're looking for the hidden gem. A lot of times cars aren't displayed in ads to their full potential, or they may need slight reconditioning that may be deterring to other buyers. A car that needs major repairs can be a financial mistake though if you aren't aware of the damage, so always make sure to get a Pre-Purchase Inspection done (PPI) from a reputable shop. This will save you headaches and thousands in repairs later on, and can also help you negotiate the price down. A lower mileage car (somewhere below 20,000 miles) is ideal, but also make sure to buy a car that has been driven instead of just sitting. Sometimes stagnant cars have more issues than ones that have been used and well maintained.

P.S. You can also buy a car from a private party, but sometime emotional ties and owed money make for a harder sale. If someone is ready to unload a car though, you may make out like a bandit. Still make sure to get your PPI.

Insurance & Maintenance

So you get buying a rare car at a good rate, but what about insurance and maintenance? Well, it's not as expensive as you might think. Places like Farm Bureau, State Farm, and Progressive often offer good rates when it comes to exotic cars, especially if you are only driving them a limited amount of miles each year. Paying for full coverage on an Aston Martin Vantage that is a few years old is comparable to full coverage on a newer muscle car like a Mustang or Camaro. Which would you rather drive? And when it comes to maintenance, a good, independent shop will be your friend. Dealerships like to up-charge all maintenance costs. You can also do maintenance yourself, but it can be beneficial to have service records for resale. Many parts can also be purchased at a significant discount online from places like eBay or car forums, along with a slew of aftermarket goodies!

IN CONCLUSION

So to recap, owning an exotic isn't just for the rich and famous. In fact, it can be a good short or even long term investment. Just be smart about the car you buy. Get pre-approved at a bank that offers a low financing rate and long term. Don't get suckered into a lousy deal at the dealership because they have somebody else "really interested right now also" even though the car has been sitting for 3 months. Know that they need to sell the car and relay that you're a ready and willing buyer. Always get that PPI to avoid the "car from hell," and use minor imperfections to your advantage when negotiating. Don't be scared of maintenance and insurance; you can get both reasonably from the right parties. If you keep your car super clean or even improve it, you can make thousands just by owning an exotic. One final question... Which exotic car are you going to buy now?

Enjoy this stuff? Make sure to let me know what you think and what other issues you would like me to address!