Quote:
Originally Posted by csu87
...[The wealthy people I know all] lease their exotic cars. The theory is they can all afford to buy one every couple years, and most do, so it doesn't make sense to take a huge hit on depreciation when the lease is less than what the depreciation is.
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Okay....that's not the "theory" I would apply were I to get an expensive exotic car. I'd definitely lease it before I bought it, but only because I think I want it as a toy, or because I was "toying" with which one I might want to buy and keep. If I decided I wanted to keep the car, I'd convert the lease contract to a purchase contract. I'm sure you've seen folks buy exotic cars. It's actually not all that uncommon to do so, or purchase it from the start, with so-called exotics that one can use for decades on end, such as large Mercedes limos, Rolls and Bentleys, and other such uncommon cars.
It makes sense to pay only for the financial value of the vehicle that one will consume, which is what a short term lease (1-36 months) is. Conceptually, it's no different than why folks rent hotel rooms or vacation homes, or take out time shares, instead of buying accommodations. As with non-exotics, however, leasing generally makes more financial sense if one wants to have a new/different vehicle every few years.
That sort of desire is quite consistent with younger folks and the lifestyle of young or young-ish successful folks. At my life stage, any exotic car I consider is one I would like to "play with" for a little while and be done with it, or it's one I'll want to keep as my "special" car for the foreseeable remainder of my life, and hopefully one that if I live to be too old to drive myself, one that will be comfortable to be driven in.
I recall a family friend (now deceased) who bought a new Rolls like the one below when he went into semi-retirement back in the 1980s. He kept it and drove it, along with a far more "regular" car for some 20 years until he died. That's roughly what I see myself doing if I get an exotic car of some sort. I just feel like with a car of that nature and myself headed into my twilight years, the idea of "a nice old car is still a nice car" works perfectly well for me. I might not have felt that way were I to have sought such a car in my 20s - 40s.
I don't have the first clue of what you are getting at when you mention "depreciation." Depreciation wouldn't come into play unless the car has a business use. Even if one can claim a business use for the vehicle, it'll take four years to book ~$12K - $13K of depreciation, less if the business use is only partial. Plus, since cars are 5-year property, one'll only get a tiny bit of depreciation no matter what one does.
I do realize that what you might be trying to describe has something to with a decline in market value of the leased property, which is not at all what depreciation is. (
http://www.accountingtools.com/overview-of-depreciation -- notice the first sentence's words "recorded cost") Decreases (or increases) in the market value of inventory (which is what a leased car is to the lessor) is reflected in the minimum monthly (annual) lease payment as well as in the stated residual value of the leased property. At the time of lease signing, it's just an estimate, but make no mistake, the lessor will estimate in his favor, not that of the lessee.
All the best.