It’s easy to walk into your local Chevrolet dealer and lease a new Corvette. But what if the car of your dreams is a 1964 Corvette?
Great news: You can lease that 40-year-old car just as easily. Or just about any other vintage, collector or exotic car.
And, unlike a conventional car lease, you just might be able to put money in your pocket at lease-end, if the car appreciates in value while you’re driving it.
A handful of companies specialize in offering the advantages of leasing — lower monthly payments, possible tax breaks and an agreed value at the end of the contract — to collector-car enthusiasts.
So, if you’ve located the car of your dreams but are put off by the high price tag, consider a lease arrangement with a company that will buy the car, and then lease it back to you. Or, you can tell the company what kind of car you want and they will
find it for you, buy it and lease it to you.
Although their leases work much the same as those offered by GMAC, there are some key differences.
The traditional, closed-end lease arrangement you use to lease the family sedan basically works like this: You and the leasing company agree on a current value or sales price and a future or residual value the car will have at the end of the lease term.
You make monthly payments, usually after a down payment, calculated to pay off the difference between those two figures. At the end of the lease you return the vehicle and owe nothing (assuming there’s no unusual damage or wear), or purchase the car
at the agreed-on residual value.
Leasing exotic or collector cars can be quite different.
Steven Posner, president of Putnam Leasing, says his company works under what is called a lease-to-own program.
“It works basically like a balloon note loan,” Posner says. “We would agree on a value of the car at the end of lease and you would be obligated to buy the car from us at that price.”
For example: You and the leasing company come to terms on a 1964 Corvette convertible in pristine condition, valued at $50,000. The purchase amount at the end of a lease, which could be three to five years, may be set at $20,000. You would make payments
on the $30,000 difference plus interest for the term of the lease and at the end pay Putnam the remaining $20,000 and you own the car.
Yes, you read that right: The end-of-lease value is usually lower than the value of the car at the time the lease begins because some of your monthly payment is being applied to the principal. The leasing company is interested only in collecting the interest
payments and the outstanding loan balance, much like a bank. The fact that the car retains or increases in value merely protects the leasing company from a loss. The lessee gains any increase in value beyond the residual. In the above example, you could
find that after making payments on the $30,000 for five years and then paying off the $20,000 residual at the end of the lease, that Corvette could have appreciated significantly.
Good and bad options That kind of plan could be far more appealing than some closed-end leases set up on collector cars by companies that offer leases much like the kind you can get on a new car: At the end of the lease you simply return
the vehicle at the end of the lease period, and, assuming there’s no unusual damage or wear, owe nothing. With a new-car lease, you can choose instead to buy the car at the residual value figure.
But in some collector-car closed-end leases, you don’t have the opportunity to buy the car; the leasing company retains ownership of the car, and because there’s an assumption that the vehicle will rise in value, the leasing company realizes greater profit.
Premier offers an arrangement similar to Putnam’s, based on a residual value at lease-end, in which you make payments based on the difference between the amount financed and the residual. But at the end of Premier’s lease, you’re not obligated to buy
the car. Instead, you have four options:
- Pay the residual and you own the car.
- Sell the car, pay the residual and pocket the difference.
- Trade in the car at a dealership and let the dealer you buy from pay trade-in value (the residual plus appreciation); you keep the difference or apply it to the new purchase.
- Refinance the residual through a new lease and continue to drive the car.
Both Premier and Putnam’s customers typically pay off the car or sell it and pay off the residual amount from the proceeds, pocketing the remainder.
Both companies, like most leasing companies involved in classic car deals, allow customers to pay off their leases early with no penalties — another key difference from a typical new-car lease.
Unlike conventional new-car leases, collector-car leases usually include more-strict conditions on the number of miles the car can be driven, where it’s stored and how it’s insured. In general, 5,000 miles annually is going to be the maximum miles, and
the car will have to be insured under an agreed-value collector-car policy. The leasing company may require the car to be garaged.
Setting up a lease on a collector car can happen in several ways.
Putnam, for example, works with some of the big collector-car auctions such as Barrett-Jackson and has on-site representatives to do the deal. MotorWerks says it can lease any make or model vehicle, while Premier offers leases on any car valued in excess
of $25,000. All will attempt to find the car you want, buy it and then lease it to you.
The drawback to leasing over typical financing or outright cash purchase of a collector car is that you don’t own the vehicle and are going to be bound by the mileage and condition requirements set by the leasing company.
But if that doesn’t give you pause, then leasing is a creditable way to buy that collector car at a lower monthly cost.
Terry Jackson is a freelance writer based in Florida.