Short Term Exotic and Supercar Leasing

Short Term Exotic Car Leasing

The barriers to possessing a supercar today are shrinking. 

Thanks to market competition and depreciation, people could get into some supercar models for a third of what they used to cost when new. Sometimes, even less.

In 2020, everybody makes supercars – from long established racing companies like Ferrari, Lamborghini and Porsche, to niche manufacturers like Rimac and Koenigsegg, to mass-market automakers like Ford, Honda and Mercedes-Benz. There is a wide array of exotic car models available to suit your every taste and give you the exact mix of performance, luxury, technology and design you crave for.

But how do you get your hands on one? Obviously, there’s buying and leasing. Each has its own benefits and drawbacks, but they both assume you’ll hold onto the car at least for a few years. 

The standard term for leasing a supercar (or any car really) is 3 years or 36 months. As far as buying goes, if you’re mustering up all of the financial power to obtain a several-thousand-dollar entertainment asset (let’s be real here…), you’re most definitely planning to keep it around for at least 4 years.

Well, what if you want to have a supercar, but you don’t want to commit for such a long time?

In this article, we’ll talk all about short term leasing and get a sense whether or not it’s a viable way to own your next supercar.

What is short term leasing?

Short term leasing doesn’t really exist. It’s just leasing – but with a shorter term than standard. 

Most manufacturers and leasing companies have adopted lease terms of 24, 36, 39, and 48 months because they offer the best balance of pricing, residual value, warranty coverage and last but not least freshness. 

In other words, you get the most value and enjoyment out of leasing if you stick with a 2 to 4 year lease. We’ll get into the math later on in this article…

But there are dozens of reasons why you’d want to lease a supercar (or any car) for less than two years:

  • Perhaps you’re waiting for a model coming to market in 18 months time.
  • Or, you’re entering the supercar market and want to test and try different vehicles before you commit to a long term ownership.
  • You may be visiting another country or state for an internship, a school-year in an exchange university program, or a temporary employment for a project.
  • Or, a frequently occurring phenomenon around Los Angeles and San Francisco- a sudden uplift in purchase power. Got a new high-paying job in the tech industry or successfully funded a startup? Whatever it is, you may have money to spend, but your finances are volatile and you can’t sink hundreds of thousands of dollars into a depreciating asset.

If we’re talking about scratching your itch for a day, a week or even a couple of months, you should just contact an exotic car rental company and hire the supercar of your dreams. You can enjoy it for a short while, get your kicks, check it off the bucket list and take it back. 

You’ll dearly for your pleasures though. Renting is the single most expensive way to have a supercar with most of them going for $200 – $500 up to $1,000 per day and beyond for hyper exotic brands.

Short term leases fill the void between renting and traditional multi-year leasing. So do the prices – they’re cheaper than renting by the day but significantly more expensive than a 3 or 4-year lease program. 

You’ll have a hard time finding such deals online. Usually, leasing companies don’t offer short term lease programs, but if you contact them with a specific inquiry, you’ll often be able to negotiate a deal. 

If you want a supercar and have the money right now, short term leasing can get you in without a prolonged contract. 

But if prices are of any importance and you’re looking to spend your money wisely, a short term lease on a brand new supercar is one of the worst financial decisions you can make. All because of depreciation. 

Short term leasing and depreciation

All cars depreciate. 

Some classic cars, especially classic supercars and limited edition models actually appreciate in value, but those are the exceptions, not the rules. 

Many supercars appreciate through the first year of their arrival on the market because of rarity, big waiting lists and the general hassle exotic car manufacturers put their clients through. 

However, after the initial hype, prices start falling at an alarming rate. High-end luxury cars, sports cars and series-production supercars can lose their value at the same rate as normal econoboxes and sometimes even more quickly.

Let’s look at the 5-year depreciation of some luxury sports cars and series production supercars:

  • The BMW M5 depreciates by 54%
  • Maserati GranTurismo, with a Ferrari V8 engine – 50%
  • Ferrari California, an actual Ferrari – 38%
  • McLaren 650S – 35% over 5 year

As you see, luxury sports cars depreciate at an alarming rate. Both of our examples sell for over $100,000 new, without options. So, they’re losing $10,000 in value per year, on average.

However, if you consider that the Ferrari and McLaren 2-3 times more expensive to begin with, they’re the ones truly bleeding money out of their owners. The Ferrari depreciates by  $12,000 per year on average and the McLaren by $16,000. 

That’s a crazy amount – the entire cost is something like a Jaguar F-Type or a Mercedes Benz AMG E 53 –  gone. 

You can go to AutoPadre and check the depreciation for whatever model you’re interested in.

What does depreciation have to do with short term leasing?

Absolutely everything! 

In auto leasing, you’re really paying to the depreciation of your car over the term you occupy it. The more and faster your car depreciates, the bigger the capital expense, the bigger the monthly payment and the relative cost of the lease.

That’s just it! Depreciation is very rarely a linear function. Instead, price trends usually follow a concave slope – market values drop the most during the first and second years. Cars continue to depreciate afterwards, but the curve tapers off, often reaching somewhat of a plateau between the 3rd and 5th year, before continuing. 

To illustrate this, let’s consider a practical example. 

Depreciation Example –  Short vs Standard Lease Comparison

Aston Martin cars radiate class – elegant, smooth, gracious, yet imposing. Their luxurious interiors, hand crafted by Britain’s finest artisans, are rivalled only by their performance, powered by some of the most advanced V8 and V12 engines to come out of the UK.

However, after you overcome the initial euphoria, you’re looking at cars that start at $150,000 – $300,000 that don’t really feature any groundbreaking technology, performance and they break – like a lot.

The biggest killer to supercar prices is reliability. It already costs eye-watering amounts to maintain an Aston, out-of-warranty repairs are excruciatingly expensive, and, unfortunately, frequent. 

At the same time, Astons are fast, but not to the pace of race-bred Ferraris and Lamborghinis. And finally, up until the Valkyrie generation of hypercars, Aston Martin hasn’t really done much innovation. The same AMG / ZF powertrain combos are reconfigured to power the next model. 

By far, Aston Martin’s biggest selling point is the flawless design, utmost luxurious cabins and widespread brand recognition. However, that’s not nearly enough to maintain the prices strong.

Let’s see how the Aston Martin DB11 depreciates over time.

2017 Aston Martin DB11 depreciation trend

According to CarGurus’ price trend tool, the market value of the DB11 has plummeted after just two years on the market.

  • 02/25/2017 – $259,900
  • 02/20/2018 – $210,633 – 19% depreciation
  • 02/15/2019 – $170,312 – 34.5% depreciation
  • 02/25/2020 – $136,246 – 47.6% depreciation
  • 06/24/2020 – $125,230 – 51.7% depreciation
  • 10/07/2020 – $131,330 – 49.5% depreciation

 

https://www.cargurus.com/Cars/price-trends/Aston-Martin-DB11-d2448

As you can see, the DB11 depreciates heavily through the first and second year, but slows down on the third. Prices reached their lowest point in June and recovered slightly in the following months up to date.

If you want to lease a brand new supercar for a term of 24 months or less, you’re going to pay the biggest portion of depreciation. Any subsequent owner or lessee is going to bless your soul for helping them get a much cheaper, but still practically new supercar with the original warranty.

Of course, different brands and models will depreciate differently, however, the biggest value drop always occurs in the first couple of years after registration.

Thanks to the Edmunds Forums, we can pull the money factor and residual values for 24 and 36-month leases on a 2018 DB11, which follows a very similar depreciation curve to the 2017 model.

2018 Aston Martin DB11 MSRP – $198,995 for the base model

  • 24 months – 1.00% APR – 69% residual values at 5k miles per year, no down payment
  • 36 months – 1.00% APR  – 61% residual values at 5k miles per year, no down payment

*For this example, we’re only looking at depreciation and accumulated interest, using the same interest rate. We’re ignoring sales tax, registration, license, bank and other fees. 

If we plug these values into the lease calculator, we’d get the following prices. 

2018 Aston Martin DB11 24-month lease price: 

  • Monthly payment – $2,710.50
  • Total cost – $65,052.01
  • Cost per year – $32,52

2018 Aston Martin DB11 36-month lease price: 

  • Monthly payment – $2,289.30
  • Total cost – $82,414.72
  • Cost per year – $27,471.5

The numbers speak for themselves, both the monthly payment and cost per year drop are significantly lower on a 36-month lease than a 12-month lease.

Keep in mind that going lower than 24 months will usually require a custom-drafted lease. This means the leasing company can and will add specific provisions and rules in your contract. They may also alter the money factor / APR, increasing the interest rate according to the risk profile.

So, the quotes you will get can be significantly different from one leasing company to the next. Since there are no ballparks to guide yourself, you really can’t know if you’re getting a good deal or not. 

Lease swapping is the better alternative

A short term lease will always be more expensive for any car with a sloping depreciation curve, similar to the DB11. 

However, if you get in or out of a normal lease halfway through, you can get the same price with half the commitment. That’s where lease swapping comes in. 

Indeed, there is a 2018 Aston Martin DB11 on SwapALease.com with 8 months and 10,800 miles remaining on the original lease and a monthly payment of $1,800. 

If you’re not super picky on the trim, color and equipment, lease swapping is the cheapest way to get into a short term lease with no extra hassle. 

But you can also use it to get out of a lease you started. This way, you can spec the vehicle in your taste, enjoy it for as long as you wish and then transfer the lease to another person. 

A word of notice though, if you’re planning on transferring out of your lease, you want to spec your vehicle in such a manner that it remains desirable for potential subsequent lessees. Also, you should start arranging the transfer well before you need to get out of the lease as to improve your chances of finding a suitable replacement in time.

The bottom line

Weighing down all the options, a short term lease on a brand new supercar is always going to be more expensive than a standard lease or a lease transfer. 

At the same time, it’s the no hassle solution if you have the money and you don’t want to commit too many years on a single vehicle. 

If experiences are more valuable to you than money, by all means spec your beast of a supercar and arrange a short term lease. Otherwise, it’s best to stick to lease transfers.

 

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