Race Car Financing?

[PCSkiBum_21]

Hello Apexspeed, I am wondering if there are any (reasonable interest rate) options for financing a formula car / if anyone has info on off road vehicles financing in general.

I will have about $15-$18k cash to go towards an FC or FB car, will likely buy used. I know I could pick up an older FC w/a Pinto for that price range cash, just seeing if I may have some options to partially finance a newer/more expensive car.

Thank you in advance!

-Brendon

[iamuwere]

Any financial planners on the forum cringe.

I still firmly believe you will never be fast in anything you can't push off a cliff at the end of the day. (to paraphrase Mr Smith...)

Jim----sorry to sound negative-------I am turning into such a grownup-------

[Daryl DeArman]

Bad news....don't race what you can't afford to wad up in a ball and walk away from.

Good news....you have enough cash to have some decent options in a couple of classes.

Further, in many instances buying the car will be the cheap part. All the other costs attached to this illness will make the car seem cheap in the long run. Last thing you want to do is add a loan payment to your tire, engine, fuel, entry fee and travel costs.

[TimH]

Imagine having a lien on a smoking lump of what used to be a car...

[Mark_Silverberg]

Ignoring the intelligence of such a decision, there are various options of financing a race car.

1) unsecured credit line - a bank or credit uniton will likely extend a personal credit line to you if you have been banking with them and have a credit history - not too much different that financing a vaction or other such items.

2) Home equity line of credit - if you have equity in your home then your can draw on that for purchase - just make sure you can make the incremental payments as the down side gets ugly.

3) Loan from 401K - also a bad idea but a source of funds if needed - once again you will have a rigid schedule for replayment - and if you leave the company you will have to repay immediately.



The best way to finance a race car is actually to never own it. There are plenty of places for renting a car. In reality that is the best way to get access to a better car that you may be able to buy outright. It may seem like you are throwing money away but it can make sense if you want to drive the latest thing.

[Sean Gallagher]

I financed a PRS CF once(1984). I went to the junk yard and bought a $100.00 car that had a Kelly Blue Book value of $10,500.00.
The CF was $4500.00. The bank guy asked me what I wanted the loan for. I told him a Race Car. After he stopped laughing I gave him the title and after a few minutes I was approved for a $10,500.00 loan. Never asked to look at the "lien car".
Bought the car, a spare engine and some extras.

Won 3 Championships and a bunch of races in that car. Good Times!


Sean Gallagher

[Sean Maisey]

Racing will never pass the financial 'sniff' test. Even big-time multinational companies bleed a fortune on it. Almost no-one outside of a select couple hundred drivers on the planet ever really earn a living at it. It just plain doesn't make sense...

That being said. I bought my first CF in 1988 shortly after graduating from Va Tech. I used my freshly minted Visa card and got a cash advance. I had no business racing at the ripe old age of 21 fresh to the job market and living in a small apartment in northern Virginia. Any responsible person would have tried to talk me out of it. But somehow I made it work.

Racing legend is full of stories of people over-extending themselves to make their dream happen. Nigel Mansell mortgaged the family home for example, the John Paul family sold drugs and went to prison... and so on... (I dont recommend this extreme BTW)

Along the way I have worked extra jobs, taken out home equity loans, gotten personal loans, traded swapped, wheeled and dealed my way through 7-8 different rides over the ensuing 23 years.

I often look back at those days of borrowed garage space, borrowed tow vehicles, and using the Visa card to finance the season and wonder what I was thinking. But, the fact is that if I had waiting until it made sense - I would still be waiting. And I would have missed all of these wonderful moments in life.

So... My advice is jump into the deep end. Be aware of the risks, and try to be smart about it, but MAKE IT HAPPEN. Years from now you will look back and be glad you did.

Sean

[Sean Gallagher]

Racing will never pass the financial 'sniff' test. Even big-time multinational companies bleed a fortune on it. Almost no-one outside of a select couple hundred drivers on the planet ever really earn a living at it. It just plain doesn't make sense...

That being said. I bought my first CF in 1988 shortly after graduating from Va Tech. I used my freshly minted Visa card and got a cash advance. I had no business racing at the ripe old age of 21 fresh to the job market and living in a small apartment in northern Virginia. Any responsible person would have tried to talk me out of it. But somehow I made it work.

Racing legend is full of stories of people over-extending themselves to make their dream happen. Nigel Mansell mortgaged the family home for example, the John Paul family sold drugs and went to prison... and so on... (I dont recommend this extreme BTW)

Along the way I have worked extra jobs, taken out home equity loans, gotten personal loans, traded swapped, wheeled and dealed my way through 7-8 different rides over the ensuing 23 years.

I often look back at those days of borrowed garage space, borrowed tow vehicles, and using the Visa card to finance the season and wonder what I was thinking. But, the fact is that if I had waiting until it made sense - I would still be waiting. And I would have missed all of these wonderful moments in life.

So... My advice is jump into the deep end. Be aware of the risks, and try to be smart about it, but MAKE IT HAPPEN. Years from now you will look back and be glad you did.

Sean

As we share the same name sir...

You are correct my good man! If I hadn't pulled a fast one with the bank, and you hadn't put your "Fresh Out of School Enthusiasm" to the test we would have never enjoyed the Open Wheel Road Racing Experience.
And where would we be today without those Good Times?
Memories of cutting the lawn on that Saturday, Going to the supermarket for Tide and Bologna, Long weekend with the In Laws.

We're here for a good time, not a long time.

Sean Gallagher

[Purple Frog]

When i wanted to return to the sport in '98, i found someone in my family much more frugal than i, and offered to pay them 2% more than they were currently getting on their CDs. Drafted up the paperwork with monthly scheduled payments, and off we went. I think i even payed the note off early.

It would have taken me probably three years to save the amount needed, and the clock was tickin'.

Of course their financial planner about stroked out when they told him they were moving cash out of his funds to invest in a race car.

Just remember the cost of the car purchase is the tip of the iceberg when you calculate what you are going to spend to get into your first race.

[ASRF1000]

I started racing with very little (let me say this a again VERY LITTLE) money. My first race car was a Toyota MR2 in Firestone Firehawk. I took out a loan to buy it, registered it and put on insurance (required by the loan) and off I went racing. It wasn't 4 races into the season when my co-driver rolled it into a ball at Lime Rock in Practice. The car was totalled.

Of course, my insurance wasn't going to cover it, so I kept registering it, keeping it insured and made the payments for the next 5 years. Needless to say, it did get me started in racing, but it also was a very expensive lesson to learn.

My advice, unless you are mechanically inclined and have your own shop space (garage) trailer, truck, tools, etc., is to explore rental opportunities. Owning a race car is like owning a boat. Its a hole that you throw your money into.

Utilize someone elses hole and their mechanical expertise and have a set cost you know that its going to cost you to race. Concentrate on driving and becoming better at it. That is money better spent. If you want to own a race car, do so when your personal finances enable you to do so easily. Remember, there is no age limit at which you can purchase a race car.

And yes, I'm one of the lucky few who have been able to make a living from auto racing for the past 24 years.

[iamuwere]

And before I sound too high and mighty, I paid for my first car out of student loans....

But, I justify to myself that I was doing solo events back then and it didn't have too much likelihood of being injured too badly.

Jim

[Brian]

It's all in how you look at it. You're not financing a race car, you're paying for an experience. If you pay for it, you either save up the money (monthly payments up front), get a loan (monthly payments out back), divert the money from some investment to pay for it (home loan, cash a CD), or you get someone else to pay for it (bank of Dad).

The best option is don't pay for it, rent it. Seriously. The cross-over point is around 2 years/10 races to where buying a car and running it yourself actually is cheaper than renting a car with support. I always advise someone starting out to rent. The problem with renting is that if you break it you have to fix it NOW. You can't push it into the back of the garage, keep it registered and keep making payments on it for 5 years. It's going to have four new corners and a new engine in it on Monday afternoon, someone else is going to be driving it the next weekend, and you are going to have a bill for $20K due NOW from the race shop.

The real advice is if you can't write a cheque for the full amount, cash it, then set fire to the pile of cash and walk away either literally or metaphorically, you can't afford to race. When you buy a race car, you go from having money to having a car with a liquid value of zero. Your money is gone. It's only if/when someone else buys your car and gives you back some of your money that you have anything again.



Brian

[ASRF1000]

Again, just my opinion. Rent and buy on-track damage insurance. It's relatively affordable for club racing through Laurel Consulting Group. It protects you from the "pay NOW" scenario that Brian eluded to.

By renting, you can get better equipment and support for the same amount of money you would spend on buying one and racing it yourself. Unless like Brian said, you were to race is a whole bunch each year.

Renting also gives you options as to what you can try before settling on one particular class of car. Once you buy one, you better be happy with it.

[carnut169]

Have you sold your sedan yet? $15-18k does buy a nice FC.

http://www.apexspeed.com/forums/showthread.php?t=46584

http://www.apexspeed.com/forums/showthread.php?t=42497

There was also a really nice rf97 I can't seem to find.

Buy what you can afford now and have a great time. Better yet- wait until the racing season is over and see what pops up. Your budget will get you a 98+ Van Diemen (Pinto) and if you save a bit more we recently saw a 07 Mygale Zetec for $25k!

Even if you only spent $10k and picked up a CFC, you'll have a blast!

[ASRF1000]

Check out this FB for only $12.5

http://www.apexspeed.com/forums/showthread.php?t=47221

[Steve Demeter]

I financed my first race car by taking out a loan on the whole life insurance my great grandfather made payments on for 22 years.

[PCSkiBum_21]

First,
Thank you to everyone for the replies and opinions/advice. I wasn't expecting so much feedback so quick. It's nice to start to get involved in a car community that actually takes time to post logical and helpful information. It's easy to sense the experience in the crowd and I am glad to be entering this scene.

Next, I will say a little bit about my history and experience thus far..
Currently, I am racing locally in a Mitsubishi Evo (see avatar pic). Therefore, I definitely do understand the associated costs of racing. I do have my own tow vehicle, trailer, and garage space. I am also well inclined to wrench on my vehicles, which I actually enjoy also. At this point I am looking to move to the next step (I feel) which is into open wheeled cars.

What I am looking to do..
FOR FUN. I am not going to try and convince anyone, especially myself, that I will be able to make a career out of racing (at least not yet ). I do this as a hobby, and I have a huge passion for racing. I want to get into an FC or FB (budget mainly permitting) and race SCCA local races and MPRA (miller motorsports park home series). The MPRA is 16 races a season in 8 race weekends. SCCA doesn't have a whole lot, but a couple more per year I would be able to fit in.

Why the thread..
The main reason I decided to make this thread is because in MPRA, 99% of the class is FB cars. I would already come out swinging with a big disadvantage in an FC I paid cash for. Yes it is for fun, but winning is usually a lot more fun Again, I will have a decent amount of money to put towards a car, but I wouldn't mind financing a PORTION of a car.

Renting..
I am not interested in renting for more than 1-2 days. The only reason I will rent (which I have looked into and made a few calls already on) will be to decide 100% which car I want to get into. I don't believe ever that renting/leasing/etc is more financially smart than owning. Why throw money at something I will have no equity in?

There are good arguments you guys made though, having the newest equipment/etc. I was going to ask about insurance as well, but that was covered, thanks!

Finally..
Looks like I will just keep my eyes open for now for something I can afford to pay cash for. There are options that pop up for sure. I have had my eyes on all of the linked FS threads that were posted here and in PM response. I've been lurking on this site for the last few months as I try to sell my current race car. That is my only designated liquid cash flow for another one at the moment.

Regarding the Yamaha converted 93, it's something I have seriously been watching but from the people I've talked to at the local track, it's not really the car to have. Feel free to PM me more info on that if you have it, and the free time

Thank you again, I hope I didn't come off wrong in my posts!

-Brendon

[TimH]

Renting..
I don't believe ever that renting/leasing/etc is more financially smart than owning. Why throw money at something I will have no equity in?

My pappy told me many, many have found that with boats, cars, planes, houses and women it's definitely cheaper in the long run to rent.

That said, you'll enjoy throwing a great deal of money into whatever you eventually own because the spending will be to make it more to your liking. Don't expect to ever build equity in a race car, however.

[Kazis31]

Racing is CASH game.
Not worth to put yourself in debt for.
Spend ONLY what you can afford.
My two cents.

[Brian]

There is no such thing as equity in a race car. A race car is pure expense. Read the thread about lifeing engines at 5 races and so on. Buying the car is just getting a license to spend money even faster than normal people can spend money.

Brian

[Mark_Silverberg]

If you want to make sure you have a competitive car and it is presently beyond your means you should wait until it is within your means. During that time you should find someone with a similar car and crew for them to learn as much as possible about that car. At this same time you should take that time to be setting asside the typical opperating expenses for racing to see if you are really willing to make the sacrifice and if you are really wanting to do something else.

There is no equity in race cars - they are like bottles of wine - to enjoy them as they were intended they will be totally consumed

Race cars have poor liquidity - they can take years to sell unless you price them very low. Cars that are at the front of the grid now may not be there in two years. You are taking on a big depreciation risk early in your driving career.

I am no fan of renting cars - but it you feel you must be on a car capable of running at the front when starting your driving career then I see it as the only choice.

[protoform]

I race a formula vee I have a top national car former Jim Kearney's protoform P-3 I use to race motorcycles. and helping a new rider pick up his crash. He asked how much damage do you think I have? I said Oh about 5k. He said Oh crap My dad is gonna kill me. I told him I would not race the bike, this is my only means of transportation. I then said if you want to make it street legle again add another 2k to the estimate I thought it was a race bike . He then said I haven't made the first payment yet. Just a bad Idea to race something you do not own outright Best of luck Protoform

[PCSkiBum_21]

I guess I didn't make it clear in my other post, I got it now. I won't finance a car, no need to beat a dead horse. I'll carry on with my original plan then.

Thanks, Brendon

[TimH]

I just took a look at the Miller website and am prompted to make an unwelcome suggestion. First, some comments. It looks like a very nice facility; I can't tell from available maps what sort of elevation changes there are on the track but multiple configurations are a good thing. The race series is a great idea though like everywhere else it's biased towards production-based cars. Looking at race results for the last four weekend events there was one race with only one open-wheel car, most had less than five, and the largest field looked to be about a dozen. Lap times varied tremendously through the field.

So what you have is a fantastic opportunity to pick up quality seat time to improve your skills without much traffic and only occasional racing, though on a good day you might find maybe one person at just about your speed.

So why do you need a "competitive" car?

Well within your budget, leaving something extra to help pay entry fees and all those expenses guaranteed to crop up in a race season, would be an older FF/CF. Money is of course the first reason for the suggestion, but there's also the fact that the formula was designed as an entry for drivers AND mechanics. You can get yourself a basic grounding in setup without any aero confusion. If/when you later decide you want to go faster you can sell a FF pretty quickly if you price it low enough, at which point you're out maybe $5k (at most on a $10-12k car) from your purchase price. There are plenty of advocates for other formula choices that would cost a bit less or more but I do advise choosing one that lets you learn mechanical grip before having to deal with wings. If running at the front is important to you, then whatever car you buy now will probably not be the one you're driving in a very few years..

[TimH]

Oh, and I noticed that the open wheel cars are in the same run group as the spec racers. Even if you're slow compared to the FB cars (not a given, depending on who's driving them) you can definitely play with the spec guys.

[PCSkiBum_21]

^ Good insight there timh. Yes MPRA does have a relatively low open wheel count on average. That's why the FF, FC, FB, FA all run in the same group together. On bigger events (F1K pro series finale last week) there were about 12? open wheel cars that was a lot more exciting to watch. Congrats to Russ on the huge win there, local throwing down

MMP is a really really nice facility, but the one major thing lacking is elevation change. There are 3 normal configurations that they run which keeps it fun for sure, but the biggest change is through the attitudes section, maybe 35-40 feet at most :/

Based on all the feedback here, and previous conversations, I am going to stick to an older FC for now. There have been quite a few that have shown up for sale in the last couple of months in the 10-15k range which is completely do-able, and still have cash immediately left over for associated expenses.

[Brad Smith]

Reading a lot of articles on the world wide debt problems lately. Now does not seem to be a good time to finance something like a race car. It is a good time to buy one that fits your budget, if you are secure everywhere else financially. It has to be something that you can just forget about if it comes down to that. There are a lot more problems than just the US and European debt troubles coming.

[JohnPaul]

take a look at this FB:

http://www.apexspeed.com/forums/showthread.php?t=38380

Glenn Cooper won the 2009 national championship in almost the exact car. You maybe able to swing this one.

[PCSkiBum_21]

take a look at this FB:

http://www.apexspeed.com/forums/showthread.php?t=38380

Glenn Cooper won the 2009 national championship in almost the exact car. You maybe able to swing this one.

This is one of the cars I have kept my eyes on for sure. It's right at the top of my price range, but I could make it happen. Also looking at Mike B's old RF93 that is for sale again, and a couple FC's back east.

[mmi16]

Buying the car is the cheap part of the sport.

Maintenance, upkeep and entry fees are what keep you on the track. If you blow all your funds just getting the car you won't have any left to run it.