I recently purchased my first Porsche - GT Silver 991S coupe. Specifications, pics, etc. to come shortly in a different thread.

I don't buy cars often and consider myself pretty financially astute as far as car purchasing goes. Part of being astute is creating information symmetry in a situation that is designed to be asymmetric in favor of the dealer/seller.

I therefore always insist (whether it's a car or a house) that I receive copies of all paperwork I'll be asked to sign at time of closing, in advance of the closing. I don't like to get surprised by new financial options or be pressured to sign something that I haven't previously read. In this case, the dealership I'm buying from did an "A" job and gladly provided information in advance. No high pressure sales tactics, which is what you would expect when buying a $100K+ luxury item.

In an effort to help the rest of us, i thought i'd share everything i picked up in the finance manager's office. Hopefully it will help some of you who are nearing the big date soon.

Purchase financing. I decided not to lease the car and instead purchase it. I used my own financing rather than Porsche. One interesting option they presented as opposed to paying cash - a 3 year pre-paid lease. In short, think of this as a 3 year lease (low mileage 7500 miles per year in my case) but instead of paying the payments monthly, you pay it lump sum up front. In every other way it's like the lease you've seen before. On what would be a $128K purchase (including CA tax, license, etc.), this option would require a $68K up front payment. At the end of the 3 years, residual is $72K. I opted to skip.

Pre-paid maintenance. I was offered 3 year, 4, year, 5 year pre-paid maintenance plan for $1400, $2400, $2850 respectively. Maintenance is pretty well defined in cars nowadays. There's a clearly articulated schedule. Any work outside of that is warranty work. Therefore, doesn't seem to be much advantage in pre-paying maintenance. I'd just as soon keep the cash and pay as I go.

Deluxe Road Hazard (Wheel & Tire) insurance. This was quoted at $1295 for 5 years. This is for actual damage (not cosmetic) to the wheels and tires only. Curb your rims, not happy with how it looks - tough. This is the one item I was interested in. However, given it did not cover cosmetic damage, I decided to skip it. I did try to negotiate it (my research showed that people were getting this for $750 at the lowest price) but they weren't terribly interested in negotiating the price. I also didn't like that it didn't cover cosmetic damage. Interestingly, they had a non-deluxe version but the per-wheel limit per incident was so low it couldn't possibly make sense on a Porsche.

I also asked the finance manager about what's most/least common about how people finance a purchase like this. He said majority do lease. I assume a big chunk of leases are people who own their own business and can therefore deduct it (pay a few percent in money factor, save 35% in taxes - that's a no-brainer). Second most common was purchase with financing. Less than 10% buy with cash outright. Note this is representative of this one dealership, not Porsche generally (and across all of the Porsche lineup, not 911 specifically).

Happy to answer any questions I can help with. Like I said, I don't buy cars often so I'm by no means in expert in the process.

 

I don't buy/change cars very often as well. I also skipped the prepaid maintenance but went with the tires/wheels insurance. In my case it covers cosmetic damage also and it's through Mercedes Benz.

I'm in the 10% ...no lease/no financing

 

I decided to finance also. Interest rate was 1.39% for 60 months...no brainer.

 

i was prepared to purchase--all cash or finance: penfed had a .74% ($70k max)-- but with the high residual and cost of maintenance, decided to lease through my company. while the idea is nice to deduct the whole lease ($1100/mo), the irs will not be too happy if they decide to look into it more closely. but some deduction + high residual made the lease terms, even with the effective 4.8% interest rate, palatable.

 

I have purchased 9 Porsches and all of them I paid cash in full . In fact I have never financed a car in my life . If I am not ready to part with the check or if I feel it's too steep I won't buy it .

Even paying cash the cost of owning a new Porsche 911 is not cheap . Once upon a time I estimated 10 -12K a year for three years and if a resdesign occurs add another 10 . Now it's about 50K for three years and your lease figures point at 68K. Granted 72 grand over 3 years might generate that 18K difference but no investment is a sure thing (in fact one can lose too) ..but a title to a car is !!

BTW .. keep a car longer than 3 years and the cost decrease tapers .

Maybe my thinking is old school but i feel that the beautiful marble floors often seen in lending facilities are bought by those borrowed from them on credit . Cash is king and there is "no substitute" .

Regarding maintenance and assorted packages.... instead of blowing 1-3K for routine maintenance and another few K for the extended warranties .. be nice to technicians and service writers and adding a nice gratuity for (their great customer service) is a positive thing . They will they be there when you and your car needs them but over time you grow older together and become in many ways like family. In short .. they will WANT to help you instead of feeling like its their job to fix your car .

 

[QUOTE]One interesting option they presented as opposed to paying cash - a 3 year pre-paid lease. In short, think of this as a 3 year lease (low mileage 7500 miles per year in my case) but instead of paying the payments monthly, you pay it lump sum up front. In every other way it's like the lease you've seen before. On what would be a $128K purchase (including CA tax, license, etc.), this option would require a $68K up front payment. At the end of the 3 years, residual is $72K.[QUOTE]

The way I do the math, the depreciation is $56K which represents 44% depreciation, which is average for a 3-year depreciation on most cars. The profit they are charging on this lease is $12K since your total out of pocket is $68K. Thus, they are fronting $60K to add to your $68K so as to finance the purchase and for this $60K use-of-money they are charging $12K interest, which works out to 20% over three years or roughly 6% per year compounded. I think that's about average, too. Sounds reasonable.

If you were to purchase the car and finance at 1.9%/year, you're financing $128K, not $60K, so your actual interest to be paid isn't all that much less than paying 6% on only $60K. But if your mileage is likely to exceed 7500 per year or if you'd rather own your car for longer than 3 years, leasing isn't a good idea.

 

In California as well. Paid for the Premier Safeguard wheel and tire insurance for $1195 which includes all cosmetic+ to the wheels and tires. Tires are to never be patched, but replaced. Since we opted for the 21" that run Michelin Latitude's, it was a no brainer. (There is no insurance cap)

Within 1 year, we are already ahead of the $1195. 1 tire with a nail replaced for way above $500 and wife put a few rashes on the rims that were replaced.

 

I am not sure if this is a bargain . My 12 Cayenne came with Pirelli tires and so do ALL 991S cars (some base cars have Good Year) . The latitude is a Michelin (which I happen to prefer) .

Insuring the Pirelli means one faces getting a new tire but has to pay to replace the other to maintain even tread (unless multiple tires have simultaneous issues) .An identical Pirelli tire would be the replacement . Insuring the Pirelli opens the door to the possibility of perpetuating Pirelli tires on the 991. That's great if a person prefers them . I don't.
...and that's even IF he gets or flat .
If he does not get a flat then he's 1195 in the red .

As for wheel rash -- I might be ok with a wheel repair on an SUV but might hesitate about a performance car like a 991 .It would depend on the extent of the wheel damage . Plus minor wheel rash repair happens to be pretty inexpensive .

1195 is a lot of plunk down an unknown event on wheels . Consider this proportional insurance cost .. how much does one pay on homeowners insurance for replacement value ? Compare it to just wheels . 1195 is about 1/5 of what 4 new 991 wheels cost .. just to insure a repair .

I do feel that in your case it may have worked out for you but I feel that each person has to evaluate his own specific needs and circumstances .

 

The policy of paying cash for toys always sounds impressive. The reality is you should not make a blanket statement disregarding the numbers involved. If I can get a loan at 1.39% and put my money to work making 5-10 times that amount in my fund, that's the way I go. Old school doesn't always mean best school. Different strokes for different folks.

 

Very true. When we took delivery of the CS, first thing I looked at was the brand of tire it came with. I had my fingers crossed and was lucky to get the Lat's (I know the Pirelli Scorpions and Yoko's were a possibility). Only when I saw the Lat's did I consider the Rim and Tire Ins. Also, if we didn't shoot for the 21" rims, I would have skipped it. I looked up the Lat's on tirerack prior to delivery and was sticker shocked. 20" and 19" tires would require 3+ punctures. 21" tires are super expensive.

And given that we had about six nails in 3 different cars over the last 5 years, I let the past pattern dictate my decision. ~8 months in, one Lat got a nail. (That makes 7 nails in 5.5 yrs). Plus, my wife has a history of rashing up rims.

I agree that everyone needs to assess their own experiences. Being over insured (health, life, car, house, limb, credit, job, umbrella and all outta pocket warranties, etc) is one surefire way to put a match to your $$.

 

Of course one can make "5-10" times in an investment but involved is one key element .. speculation .
A car's title on the other hand is a tangible asset and whether it depreciates or not most people do in fact NEED transportation.
A loan however is leveraged debt . Big difference .

And what if the speculative investment tanks ? Then even that 1.39 percent is that much more added to the mess .

 

As my dealer explained to me, if you total a car with a prepaid lease, the insurance company will pay the lienholder for the depreciated value of the car. Gap insurance picks up the rest and your prepaid amount is lost since you didn't actually own the car. Ouch!!

 

Surely we have had this argument before But I will assume we mutually enjoy exchanging our views.

I would argue that 1.39 % is essentially free money. An investors tolerance to risk is what it is, regardless of how they pay for their vehicular entertainment. If that gentleman prefers to invest a portion of his assets at a beta that has an E(r) of 7-10%, then of course a car loan at 1.39 sounds like an easy choice. After all, modern porsches are not investments but rather expenses, with a rather steep depreciation at that.

Then saying that one needs a car for transportation Well this sounds like something I would use to justify my porsche as well. With that said, we clearly have more economical options for transport.

One thing we can agree on is that to minimize overall annual cost, one should own for 6+ years and ideally keep the miles below 10k/year.

 

Everybody has their own "cost of capital", which is a well understood financial notion.

For example:
- Take a 65 year old retiree. He/she has $5M in assets in the bank, only income is Social Security. They will want low risk, liquid investments. 80% of their money is in bonds. Those bonds pay 1.5% pre-tax, 1.0% post-tax. So cost of capital for this person is 1.0%.
- Take a 40 year old executive. He/she has $2M in assets in the bank, but earns $400K annually in salary + bonus. They're 60% invested in equities (6% return), 30% in bonds (2% return), 10% cash. Weighted average return of 4%. They don't care what happens to their $2M in the next 5 years because they have no plans to use it. The 10% cash is enough of a rainy day fund. Cost of capital is 3% after taxes.

For the retiree, 1.39% loan from Porsche, PennFed, etc. is expensive. Why pay 1.39% when your cash is earning 1.0%?

For the executive, why put cash into the car? 1.39% is a no-brainer loan next to the 3% after tax return. Taking the loan, the executive can expect a 1.61% positive return over any 5 year period since WWII. This executive has to take a view on what level of risk they're willing to take for 1.61% return, but most rational investors would take this bet.

No sense in getting into academic conversations. Each individual scenario is different. To each his own.

 

Do you know how many "executives" were financing their Porsches in 07 only to pitch them for sale in 08 -09 when the economy tanked ?
Why do you think in 2009 the dealerships had so many cars that Porsche was offering 10K incentives because they had surplus on the boat ?
Back then no one was buying/leasing like today . Some dealerships even closed or declared bankrupcy. That's when guys like me got a 20 percent discount on a new car and I am not the only one . Go search the 997 forum .. you'll see the posts. Look at the dates . Look at some of the posts as well when Porsche declined a lot of "executives" too ( as well as other lenders ).

Personally . and this is simply my opinion .. it's never about what one makes or has in savings . It's what he owns . and until that title has his name it .. the car is pure and simle .. NOT his !!