It Makes More Sense to Lease a Rolls-Royce Than to Buy One
Leasing a Rolls-Royce seems somehow counterintuitive. When we picture a Rolls-Royce owner, we don’t imagine someone haggling with a dealer over monthly payments and mileage allowances. We imagine someone with more than enough money to buy anything he or she wants outright. But leasing is key in the American Rolls market. According to Gerry Spahn, head of corporate communications at Rolls-Royce North America, around 40 percent of current Rolls customers lease their cars, with percentages running even higher on “entry level” models such as the $263,000 Ghost or the $285,000 Wraith.
Rolls dealers in Southern California—the nation’s largest luxury car market—even go so far as to advertise lease specials on their website. A 2015 Ghost: 60-month lease, $30,000 due at signing, $2,699/month.
With interest rates as low as they are right now, it often makes financial sense to use cheap money to extract the most value from one’s physical purchases and not to tie up a significant amount of capital in a rapidly depreciating asset. A Rolls Phantom can easily cost upward of $500,000 new and tends to lose up to 30 percent of its value in the first couple of years. That outlay could be better invested elsewhere.
The availability and incidence of leasing in the ultraluxury market has also been evolving. “In the last four years, five years, you’ve seen that leasing in the whole luxury segment has increased, because the customers are becoming more comfortable with it,” says Bailey Vanneck, the general manager of Miller Motorcars in Greenwich, Conn., one of the East Coast’s premier ultraluxury dealers. “Maybe in the past, you know, leasing was for the guy who didn’t have all the money—a little more of an aspirational buyer. But now, I mean, it makes financial sense to do it.”
The Provenance Program
Leasing also works well for dealers. Cars that come off a limited mileage lease are almost always quite well maintained and can thus enter into Rolls’s growing “Provenance” program. (Spahn requested we not refer to the vehicles as “preowned” or “used.”) Here, they can be profitably resold, or even released. According to industry sources, contemporary preowned Rolls-Royces depreciate by about half during their first five or six years but then plateau and remain consistent, providing value that can be extracted in the secondary lease market. The same aforementioned L.A.-area dealer recently featured a lease special on a 2009 Phantom at $25,000 down and $2,699/month.
Moreover, leasing offers dealers the opportunity to be in regular contact with their customers and to have a concrete date when they know a particular consumer will require a new vehicle. For dealers who handle a range of ultraluxury marques, a high-net-worth individual who requires a new vehicle practically guarantees a repeat transaction.
“We reach out constantly, almost every quarter to six months with our customers, just to touch base and say hi,” Vanneck says. “But you know, at the end of 36 months, that person is going to be coming out of a car and he’s going to need something to drive.”
Obviously, leasing a Rolls isn’t like leasing a Kia. As with everything else the brand does, it is customized to the particular needs of its customers. “It’s very bespoke,” Spahn says. “It's not like, give me your FICO score and we'll give you this, this, or this price. It’s multiple tier, and obviously a bit of it's based on your credit history. But it's also based on the relationship we have with you.”
Financing for a lease can come through Rolls-Royce, through one’s bank or financial service company, or through private luxury-car lease companies such as Premier or Putnam. Rolls uses closed-end leases, whose signing costs and payments are fixed, and the vehicle is simply turned back to the dealer at the end of the lease—typically from 24 to 60 months. Private companies often use open-end leases, which require an end payout based on the final residual value of the vehicle, an amount that can be owed to either the lease-holder or the leasee.
Determining this residual value can be somewhat tricky, in part because nearly everyone who buys or even leases a Rolls-Royce adds custom personal touches to the vehicle—an exterior color that matches their favorite handbag, a cut-crystal decanter etched with the label of their vineyard, their family crest embroidered into the headrests. One person’s beloved customization can be another’s discount.
The Next Owner
For what happens after that first driver passes the car on, use pattern is also relevant: Was the car in private hands? Was it used as a house car by a hotel? Was it used by a celebrity or head of state? Was the mileage limited?
“When you go to finance your Rolls,” Spahn says, “you have to think about things you may not think about with other cars. How am I going to use it? How am I bespoking it? How long do I want to keep it?”
This scarcity and specialization has its benefits as well. With a limited supply of vehicles and an expanding number of the global superrich, potential customers can become quite, ahem, aware of the vehicles that have been built and purchased by others and can await their arrival in the “Provenance” program breathlessly.
“When you have very few cars out there,” Spahn says, “you’re going to have second, third, or fourth owners chasing particular cars they want. And that holds the residual value up.”
Of course, as beneficial as leasing might be, it isn’t for everyone—or even everyone who desires a Rolls-Royce. “There are some people out there that still like to say, I own my car,” Vanneck says. “I don’t lease. I don’t finance. I just pay cash.”