PushingMyLuck

A friend wants to buy a new Porsche as a weekend car, but he was having a hard time justifying the $800/mo lease for a car that might get driven 3000 miles a year. Of course, I advised him to just buy the car outright and keep it for 20 years. Isn't that how people do it? That got me to thinking about total cost of ownership of an exotic. I was thinking more about people who lease exotics (rappers) vs. enthusiasts who buy/own the car for many years. What is the best way to calculate this?

How about an example? 1993 Porsche 911 MSRP was $55k. 20 years later, trade in value today is about $20k. Netting out the sale price, you’re out $35k to own the car for 20 years. That’s about $100/month. Is that right?

Today, a late model Porsche 911 with 20k miles can be had for $50k. Basically a new car. Assuming you have the money, what is the cost of owning this car for 20 years? $50k "self-financed” over 20 years comes out to $275/mo. But, you’d still have a residual value of $15k-$20k.

Numbers might be off, but can you net that residual right off the top? So, you only take a $30k loan for 20 years at 3% = $166/mo. (The main flaw here is that I am ignoring the time value of money)

The general premise holds, regardless. Owning an exotic for 20 years is a fraction of the cost of leasing a new $800 exotic every few years.... The key to this analysis is that the 3rd weekend car barely gets driven. Many people own these cars for 20 years, since they are often the 3rd car, and see little use. Most 20 year old 911’s are lucky to have 100k miles on them.

If the desire is to enjoy a true driver’s car, it appear that it can be done very affordably. But, if the goal is conspicuous consumption to impress others with the latest/greatest, then this analysis doesn't apply.

Anyone done this type of analysis and have anything to add?

Cuda911

It's almost always financially wiser to buy than to lease. But, some factors you are neglecting. Here are just a few:

- Leases may be more favorable as a tax deduction, depending on a person's specific employment circumstances.

- Maintenance costs: A leased car will generally have a warranty. After a certain number of years, the purchased car won't.

- If you keep a car for 20 years, at the end of that 20 years, you are driving a very old car. The person leasing is typically driving a rather new car.

- The first-year depreciation on a new car is huge.

Other factors (I'm sure some will chime in with some good examples)

EDIT: I just noticed that you cross-posted this question in at least 5 forums.... not very good forum etiquette.
.

Redline911

When you lease a car you're under warranty as Cuda points out. You're also never going to be paying for a major service or repair. Think of how much you'll be spending on maintience (clutch, RMS, water pump, etc) between years 5 and 20.

I think the way to go is buying a car 3 or 4 years old and selling at 7 or 8 years. Or taking one from 30k miles t sell around 60k miles.

powderzone

Haven't done the analysis since it was pretty simple math. $ = Pcar = smiles
Doesn't matter how old or new really. I have a 997 and would love to have a 993 as well...heck I'd also like a '73 RS.
Your analysis isn't taking into consideration the annual maintenance costs. I haven't had mine for 20 years but I'd bet that over 20 years a $100K car is going to cost $30K to $40K in maintenance including the inevitable replacement of a few major components along the way. If you really want to get specific with your calculation, open up an Excel spreadsheet and for each year estimate payments including annual repairs and maintenance. If you buy with cash in year 1 then you have a one-time (negative) plus all the annual repair and maintenance costs. If you finance then you've got your total annual payments plus interest plus R&M. In year 20 you can estimate the terminal value of the car which is entered as a positive. There is an NPV function which is pretty simple to use. You will need to include a discount rate; the opportunity cost of not having invested all that money in something like stocks, bonds or real estate (I'd use 10% or 11% as a discount rate). Your friend should also take an honest look at whether he will want to mod the car since that costs $$$. I've got $15K into after market equipment and haven't even touched the motor. and no I didn't do an NPV calculation on those expenses either. lol
Cheers,
Dave

MessyMarvin

You do not buy a 911 and try to justify the cost, if you can afford it knock yourself out, if you spend a bunch of time trying to justify it you probably can not afford it or do not want it as much as others. At the end of the day all of us could retire earlier if we just invested all of our money, but how much fun is that?

Owning any car for 20 years is cheaper than getting a New one every 2-3 years, driven a lot or not. Find me someone that keeps their 911 for 20 years, it is probably less than 1% of owners.

I really do not understand what you are even asking.

By the way does your friend happen to actually be you? Who would ask something like this on a forum for a friend?

Edgy01

This is not about the costs being justified. It's all emotion. If you attempt to justify it on an excel spreadsheet do yourself a favor--don't buy one. You'll never get your 'money' out of it. Perhaps you're really not cut out to own one of these. (your friend, that is).

Robocop305

Just buy one used and enjoy it! Sell it when you can't afford it anymore....cars are never an investment....

petee1997

Since 1983 I have owned seven Porsches. These cars were never daily drivers but rather toys for the weekend. The cost was extremely high and a waste of money. Would I do it again? Yes, in a New York min.

If we only spent money on reasonable things, life would be boring. To achieve a certain quality of life we must indulge ourselves in the frivolous. As they say, life is short and death so long.

Tcc1999

Ah, someone who understands the idea of the future value of money!!! A discount rate of 10 to 11 percent may be a bit high but what the heck. The math (which is very simple), shows what a poor "investment" these cars are - which is why you probably should not think of them as such. Anyway, $55K for a new 1993 964, 10 percent discount rate. If you'd have invested the money in stocks, bonds, frozen concentrated orange juice, etc. and benefited from annual compounding, you would have $370,012 2013 dollars. Oh yeah, less your current 2013 value of 20$K.

Depending on one's financial situation, that's a hefty price tag for a "third toy". Of course, you could die at any time and that money in the bank would be useless to you and you'd have missed out on all that driving fun - or you could live to be 90 and, as a consequence of poor financial decisions, indigent. In that case, we, the taxpayers, will be supporting you and indirectly paying for your "third toy". Hmm, personal responsibility - heavens, that's rather republican.

G356

It's entertainment and not an investment.

ELUSIVE

Simple math....the longer you keep it the less it costs you per month.
That is unless you have major problems with it.

Cuda911

Yes, these present/future value of money calculations are always nauseating. Makes me not even want to buy a box of Wheat Thins, knowing that it will ultimately cost me a few hundred dollars, based on the future value of money calculations.

However, at current investment return rates (other than stocks) at ridiculously low levels, the future value may not be nearly so great. That's partly why I bought my Porsche. I had some cash sitting in a safe. One day, I noticed it was getting a musty smell. So, rather than have a stack of depreciating cash that was getting moldy, I went out and bought a Porsche.

Of course, I should also probably buy some stock in Purina, since I may well be eating cat food if I live to 90.

MyEmily

I think I got my money worth.

2006 C4S : $105k , 6 set of tires @ avg 2k = $12k, Reg Maintenance $500 / year: 7 yrs @ $3.5k, Insurance $1500 / yr: $10.5k, 1 speeding ticket $375, 1 major repair: Oil separators $3k Accessories add on $1500. Gas mileage avg 16mpg @ 101k happily driven miles : 6312 gal of gas @ $3.80 : approx $24k. Total approx cost $160k for 7 yrs.

What's it boiled down to? approx $23k per year or $1.58 per miles... Bottom line Like Edgy01 said " It's all emotion." I've got my money worth!!! Countless speed therapies, and the joy of just Driving it.

pissedpuppy

it's not an exotic

Chris51080

I just purchased my first P-car, and cant wait to get a 997. You dont buy them because they make financial sense to do so; you do it because of the smile it puts on your face every time you get in it.

Basic transportation makes financial sense, a Jetta, Accord or Camry for example. In the end, you either spend your money on some things that give you a little bit of joy, or you try rationalize your purchases.