How much does it actually cost to own an exotic car?

either cars are getting less expensive to own which is unlikely or people are fundamentally misunderstanding their own costs of ownership there's a scene in the movie Ocean's eleven where George Clooney's character is speaking to Brad Pitt and he's trying to justify this risk that he wants him to take and the justification that he uses is that the house always wins he says if you play long enough and you never change the stakes the house takes you and certainly that applies to the casino gambling industry but it also applies in auto ways to buying and owning cars particularly exotic cars and we talk a lot about here about great buys and great ownerships and great flips in ways you can make money owning cars and yes those cases are valid they're all true and those are great things that you can aspire to but in the aggregate in the long term when you own cars like this they cost potentially an awful lot of money and there's a fundamental lack of understanding of what true cost of ownership is whether it's per mile per month per year per car whatever the case we however you want to evaluate it it does cost money and even though we can find these microcosms and these miniscule examples of times where you make money in general in the aggregate and over time it's expensive and what I wanted to talk about today is a little bit of how I used to evaluate cost per mile of ownership because there's an exotic car rental company you do sort of become hyper conscious to this idea of what the cars are costing you because I have to evaluate profitability based on the revenue that comes in but also over the expenses that I have to anticipate because I might make a lot of money today and have to spend a lot of it tomorrow and hopefully it's not more than I just made but as I evaluate sort of setting up money for the anticipated expenses based on consumption and lifespan I really have to look at whether or not this is a profitable endeavor and as I would look out and kind of survey what it was gonna cost me to own these cars I recognized early on that there's a few things that I have to account for that people don't necessarily think of as they go in and buy a car and the first is really the cost of the money because it doesn't matter if it's interest on a car loan or just not having the money invested elsewhere having money tied up in an expensive asset cost a lot of money and so I would look at you know four to six percent in most cases is what it was costing me to have the car and back then interest rates were a little higher or maybe seven eight percent occasionally particularly for a rental type purpose but it doesn't matter if it's you know two point nine percent it still cost you something today and at a time lately where the market returns ten to fifteen percent sometimes per year that's a huge cost of money that you really have to recognize and say well is it worth missing out on this opportunity in order to have this thing that I enjoy also you've got depreciation and that's one of the most misunderstood facets of exotic car ownership because we talked about and look at a lot of examples of cars going up or flip opportunities or at least older cars where the depreciation is either slowed down or potentially turned around into appreciation but if you talk to people who have owned reasonably new cars in the aggregate in the long term most of them will tell you that it cost them about one percent per month and this is sort of justified by the residuals that you'll see manufacturers put on cars I mean if you see a lease where the residual is less depreciation than one percent a month in most cases that's a pretty good deal on a lease I mean that's like a 911 or BMW 3-series type residual but even as we see some examples of these blue chip investment exotics most of these cars like 250 GTO s or 300 SLS or asked in DB 5s that are perpetually going up right now most of them don't actually beat the stock market I mean the 250 GTO yes you could have bought one for six or seven or eight thousand dollars back then and it's 50 million dollars now but you could have bought a lot of stocks back then that would be worth about the same and you didn't buy those and that's okay but as you look at buying one today that is really the only car that on a long term basis has beaten the stock market so as an investment it may not become expensive but there is still a cost relative to more traditional investments obviously maintenance is really the monster in the closet of exotic car ownership for most people who are looking at this as a prospect and yes there's expensive maintenance schedules I mean oil changes are 250 to 500 bucks and an annual service that wraps in a few other things might be a thousand or $1,500 on a Ferrari Lamborghini McLaren asked and Bentley whatever you're looking at and you have to anticipate that but usually there are bigger expenses like valve adjustments or timing belt replacement or something like that that comes up every three to five years that you might end up sort of holding the hot potato and having happen and even if you look at your ownership window of a car to say that well I'm going to avoid these things because either they were just done or I'm not gonna have to do them before I sell it most people want a car that's been properly maintained and if you do you still may not avoid just the maintenance and service expenses that are kind of consumable or random things break on cars I mean this week I had to spend $4,000 on a used differential for my marciella go a new one was fourteen thousand I was able to minimize that expense by finding a good used part but it still was something I wasn't looking for and expecting but I knew that it kind of goes with the territory you could have some very expensive things that we may or may not anticipate but that do happen and you kind of have to look at it well you know I'm either dodging these expenses on kind of a random chance basis but the odds are gonna catch up with me at some point if for me I've done well I've made good money flipping cars and owning cars inexpensively but I recognize that at some points it's sometimes these things are just going to happen and if you look at these things there's you know on a per mile basis most of them are unavoidable on a per time basis so the number of miles you drive definitely influences how much it costs you per mile and if the government will let you you know write off 50 60 cents per mile on a car we're talking about an entirely different paradigm with these cars because as I always evaluating my cost of ownership for the rental company and generally kind of gravitated towards about five dollars and seventy cents per mile and when you say that when you think about like a 10 mile drive costing you 50 or 60 dollars that sounds crazy but it's not because if you look at not only the time value of the money and the depreciation and the maintenance and the service you've also got the consumables that are easy to anticipate gas tires clutches things like that they do add up and I mean a $2,000 set of tires is a fairly small line-item on what it could cost you to maintain a Lamborghini but if they only last eight or ten thousand miles that's still about 20 cents per mile for tire and if you have a $3 gallon of gas that only gets you eight or ten miles that's another 30 or more cents per mile so you're at what the government thinks cars cost with just two consumable items not to mention the fact that you have these clocks ticking on all these other items and so it really did play out that way but mostly because I was owning these cars through the consumable life of these parts I was doing multiple clutches multiple sets of brakes multiple things like that and I always recognized that I needed to have in revenue as close to 1% of a car's value per day that it was rented out in order to know that I was going to be profitable and that was on a shoestring budget minimized expenses you know running things as lean as I possibly could when you start looking at big marketing and big staffs and things like that you have to make a lot of money and the exotic car rental industry today is not allowing that type of revenue if you look at the rates that are available in the marketplace today that certainly isn't reflected so either cars are getting less expensive to own which is unlikely or people are fundamentally misunderstanding their own costs of ownership and that was pretty frequent because I would get approached all the time by people who wanted help making their exotic car payments and asking me to rent them out and split the revenue who didn't understand the other expenses are gonna eat them alive as we put miles in their car but also we have things like taro today which is a great peer-to-peer car rental site where I can rent my car to you if I so choose and if you look at the rates that people are asking on their own accord evaluating what they think it costs people to drive their cars the numbers are insanely low and that means that in most rental markets if you were to offer a fleet of exotic cars for rent you'd be priced out of the marketplace by people who just don't understand what they're doing wrong and that's sometimes what these peer-to-peer sites I mean there's a lot of uber drivers that don't understand what their car is costing them to operate that aren't actually making money they're just generating revenue and if you're out there seeing cars that are available for rent even from reputable companies because a lot of market places have these kind of cars shared arrangements where people are running out 458s for six or seven hundred dollars a day I know Rob Freddie's talked a lot about we know what he sees the rental car more becoming because he'll go to places and rent a car for really cheap and maybe it's beat-up in a terrible example but when you drive it down Las Vegas Boulevard everybody thinks you're a celebrity and so nobody really cares but even with these cars antero you'll see i ate sand Aston Martin's and Gallardo's and 430's in cars that are a hundred hundred fifty thousand bucks for rent for four hundred dollars a day and you are losing money every time you rent a car at that kind of price but people do it all day I mean there's hundreds of examples and we even see them categorized on vin wiki of interesting cars that are available on Turo and i look at them all goodness gracious these people are losing so much money by letting people rent their cars out not only in the wear and tear but just the consumable things that obviously they don't think they're gonna end up having to pay a ten fifteen year old car isn't really depreciating but is it becoming more expensive to service absolutely and so if you were looking at whether or not you could come into a market and say well can I rent exotic cars out for this amount of money in most cases now the answer is no because someone who can't do math as well as they need to is renting their car out for less than they ought to and it's important for us to look at it because the dream of owning an exotic car is a great one it's an awesome goal and relative to a lot of other things you know boats planes crazy travel it's a pretty inexpensive hobby and it's rewarding and there are ways that you can minimize and avoid some expenses but if you own them long enough even if it's not the same car if you own enough cars long enough it's gonna cost you something it's a reasonable amount of money it's worth it I love it we enjoy it but you need to go into it eyes open and really look at what its gonna be because eventually the house does win the odds catch up to you and you have to buy something that's expensive for it but you know what you get to do the next day put it into the gear and blast it down the highway [Music] [Music] you [Music]

Channel: VINwiki

Views: 627,184

Rating: 4.8931932 out of 5

Keywords: Ferrari, Lamborghini, Exotic Car Rental, Cost of Ownership, Gallardo, 360, F430, 458, 488, Huracan, Murcielago, Cheap Exotic Cars, Car Flipping, Car Ownership Costs, Exotic, Depreciation, Time Value of Money, Car Loans, Interest Rates, Exotic Car Insurance, Bentley, Aston Martin, Cost, Ed Bolian, VINwiki, Car Stories, Car Buying Advice, Salesman, Negotiation, Entrepreneur, Exotic Car Loans, Vehicle History, Maintenance, Service, Major Service, Consumable, Tires, Brakes, Clutch, Turo, Car Sharing, UBER

Id: OpRzPVjNGNc

Length: 10min 57sec (657 seconds)

Published: Wed Apr 11 2018

Reddit Comments

[u/[deleted]]

You smooth talking son of a bitch, Ed. Excellent video

[u/gr33nhand]

Meanwhile people who are smart and buy clean beaters to rent out on turo are making a killing. $28/day for a perfectly good older Acura that makes me look like a local instead of a tourist, and I don't have to interact with anyone to pick up /drop off the car? Yes pls.

[u/cerberaspeedtwelve]

I remember reading an excellent article about six months ago from someone who had kept tabs on cars being rented on Turo out of Philadelphia International Airport. In short, not one of the top ten most hired cars were actually making any money.

The second most popular car was a 2014 Mercedes CL. I am familiar with the running costs of this car, having owned one myself. It was being rented out for two weekends a month at $600 a go. $1200 should surely cover the lease payment and then some, right?

Well, nobody is going to give you a lease on a four year old car, so let's assume the owner bought it with cash. New, it was $160k. Four year old examples are closer to $60k. Depreciation is still hitting this thing at $10,000 per year. Servicing is going to be a minimum of $2500 and tyres are $300 a corner and will need changing at least once per year.

Giving this situation the massive benefit of the doubt, assuming literally nothing else ever breaks or goes wrong on the car and also assuming that the owner puts no miles on it himself, he's still not making money.

The problem with Turo is that it is supply-and-demand in reverse. If someone has a nice Porsche to rent out and is even more desperate than you for some cash to keep the bailiffs from seizing the house, then they can undercut you by several hundred dollars. Even though they're not making a profit, it's something. The whole thing becomes a race to the bottom. Turo didn't start out to prey on the economically desperate, but that's what it's doing. Even rich people occasionally make terrible mistakes with money. An ageing supercar is not a good investment (look at the cars at the meeting in the video with their panel gaps and cloudy headlights - who's going to pay money to rent that?) but Turo makes it that much easier to justify.

*Edit - Just had a look on Turo for Newark Airport. There's one guy leasing out his BMW X6 M for $900 a day. There's also another guy with an identical X6 M who will take $200 per day.