Can I buy a ferrari?
 

Well, Hello everyone, I don't really know whether I can explain my question clearly enough but I will certainly try my best.

I am 26 this year living in Australia owning more than two dozen properties on less than 50% gearing and doing several real estate development. The nature of my portfolio/projects are large in capital layouts and poor in immediate cashflow. Actually there is just no "excess cash" like others might enjoy, because if there is any it will be used to pay down debt.

After reading the thread " any regular working guys own a 360", I start to wonder myself whether I can "afford" a ferrari. I have the cash to buy one brand new (Damn they are expensive in Australia), but I will not be doing so comfortably. I may have to sell one or two of my properties to keep the cash level where I am comfortable with.

The question is, If I feel stretched, can I still buy one?

Second question, what is your comfortable level to buy a ferrari? Maybe measured by the % of someone's net asset? I personally know a few people who are doing well but keep a low profile. It further raises my doubt about buying such a luxury car as it is not a necessity.

If this is stupid question to you just ignore it. Cheers.

If I were in your situation, I would wait until I could pay for the car and not sell any properties to do so. There's a much higher probability that your real estate will appreciate over time, where a vehicle will depreciate. What is the opportunity cost of capital if you're selling and tieing up growing assets?

You certainly can buy a Ferrari...but is it the smartest decision? I don't believe so. As stated above, you should wait until you don't have to sell some properties as that's what I would do. The real estate will appreciate at some point where your Ferrari will be worth practically nothing at some point. You did say you have enough cash to go purchase one right now. Why don't you purchase a nice luxury car instead, where you can keep enough money to be "comfortable" as you put it. From the sound of it, you will have your Ferrari in no time. No need to rush into one now. Does this help? Good luck! :cool:

Understand. I'd say the opportunity cost is at least the speed of depreciation on the Ferrari.:o

Thank you for the advice!

Thank you! Your commends certainly helped. Cheers!

Addbe, if you log on to ferrarichat, this topic has been discussed extensively. Do a search. One idea that comes up is 5% of net wealth.
Just remember, its harder to sell exotics now and you will likely get beat up on the exit should you decide its not right for you. Ownership can be magical though, but I would suggest looking for one of the late models that has experienced most of its depreciation already and in my experience, get a well serviced (documented) car that has been regularly used and avoid the low miles garage queens.
Good luck.

Thank you Riverflyer, ferrarichat is awsome! 5% might be a bit high for me. 1~2% is where I can push the bottom comfortably.

I think I found the answer. If I feel stretched financially, then I'm just not ready. Will wait.

I think living confortably is better than having a Ferrari, and living horribly!

I read and passed on replying recently but thought this over and will contribute here. I understand all the math and advice but I'd say do it. My reasons are:

- I came within $80 (their take-it-or-leave-it price versus my top offer) of buying a 275 GTB in 1975, when I was 26. For 35 years I have regreted that decision. Worst $80 I never did spend.

- I recently got a new F430. Driving it, I wonder why I waited so long.

- Done right, you really would not have too much financial exposure. I assume you would sell two propoerties that make sense from a business standpoint, not ones you expect to escalate alot, etc. If you buy well then you will be able to get out, if your don't like the car or need cash, without losing your shirt.

That said, I hadve to say that I bought first at age 61, at a point in life when the mortage is paid off, the kids are out of college, we have all the art we want (worth more the the Ferrari), and so forth, and I fall under that 5% rule (first time I ever heard of that, but nicely conservative). Still, for 34 years, I kicked myself every time I heard the word "Ferrari" because I immediatley thought - why didn't buy that '66 in '75?

I say...you are young and probably have a lot of time left in your life to accumulate wealth etc.... If that is your goal in life, to many it is not. To me if you can afford the extra bill, and your lifestyle is not altered, then do what makes you happy. You can save your A$$ off for years and accumulate immense amounts of cash, art, land, investments and then you have a stroke or get hit by a car or cancer etc....then you will regret not living life to the fullest while you could have. Not that having a Ferrari is equal to living life to the fullest, but if that helps you enjoy life while you have it then why not??

are you saying that one's net worth has to be $7-15millions to get a $150K car?
I think that's a bit conservative.
IMO, 5% is just about right with one more requirement, the car must also worth no more than 20-25% of your income.

How much would that 275 be worth today?

If you have to ask you are most likely not comfortable with the idea. I love my exotic, but i bought a porsche after and I could have really been happy saving all that money and just driving my not exotic super car

Answers to a couple of questions:

- What would the 275 GTB be worth today? It was a late '65/early'66, short nose, SOHC, three carb model -- the slowest, lowest powered, least desreable 275 GTB of them all. So, oh, in good condition it would be worth what? $650,000? But the money today is not the point. I really would have liked to own and drive the car, even back when it was $6,680 asking and $6,600 offered: forget the money angle, it would have been grand to have owned it, even briefly.

- Porsche instead? I owned an '04 Carrera S. Okay car. The interior was nicely laid out and very useable and sensible. it had simple and "classic" exterior lines, but was not particularly pretty, and surprisingly it did not really handle that well. If is was worth $92K (and I paid that for it), then my F430 is certainly worth the $220K it cost.

Lee, I'll consider your suggestions seriously. I have a 911 Carrera and I don't know what ferrari feels like. Thank you.