Secret Supercar Owner's space
SSO: Thoughts on the Market - Part II
November 2, 2015 6:40 AM  |  Posted By: Secret Supercar Owner
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A few weeks ago I posted up a blog on the car market under the title “Is the Boom Over?”.  Not surprisingly, I got a fair amount of direct feedback on the blog and it tended to be highly polarized.  The two schools of thought are quite predictable.  On the one side are those that believe the market is sustainable, interest rates are still near zero and it will continue to rise.  The other side thinks we are in a bubble and it is going to bust sometime in the near future.  If you look at recent auction results it would seem that the market is healthy and continuing to head north.  However, if you look at what’s happening in the private market the story is a bit different.  I have gotten several emails in the past couple of weeks from well known broker’s that have include the words “price reduction” in the headline.  The cars in question include, a Ferrari 246 GT, 330 GT 2+2 and a 550.  I went back and checked my email archive from 2014.  For the full year, I only received two emails highlighting price reductions.  Even more eyebrow raising was a separate email from another European broker offering a special package deal on a Ferrari F40 & F50 at significantly below recent auction and advertised prices.  Which is the true indicator of what is happening is the million dollar (or more) question.

To get a better idea of what is going on in the market, I went through the classifieds in a number of magazines and perused a number of websites.  My net impression, we are truly living in interesting times and I just don’t understand the prices being asked in numerous cases.  Two that really shocked me were the GBP 250k asking price on a Porsche 911 2.4S and a GBP 130K Ferrari F355 Spider.  Neither of these are exactly rare.  I can remember when the 911 2.4 was a hard sell at GBP 30k and F355 Spiders were tough to move at GBP 40k.  Are these both just that much more desirable several years down the road?  The 911 2.4S is a lovely car and fun to drive, but is it worth a quarter of a million quid?  The Ferrari F355 Spider is certainly one of Pininfarina’s classics.  They also tend to be fragile, have a demonic soft top system designed to impale anyone in the driver’s seat over 5’10 on the steering wheel, and come with a GBP 3k belt change bill every three years that can easily increase to GBP 10k with a few “while we have the engine out” extras.  The other thing that surprised me was the number of F40s, F50s, Daytonas, BBs, & 365 GTC/4s, not to mention numerous examples of other Ferrari and vintage Porsche models, for sale.  Based on what I saw, supply across a range of models is far more robust than I ever remember it. 

So right now we have a situation where there is plenty of supply, plenty of low interest liquidity that can go after the supply.  There is a question in my mind as to how much private demand there is left at the current price levels.  If confidence in the global economy drops, the news out of China and Wall Street is not great, and interest rates finally start to rise again, demand will most likely take a beating.  Once prices stop rising, it will be very interesting to see how many enthusiast/investors decide it time to find a new hobby after their first major five figure maintenance bill.  If so, this could push supply over the tipping point.  2016 will be a very interesting year.  

My Twitter account is @SupercarOwner . I will send out a message when the latest Fast Fleet article or blog is posted.

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DdWorks at 2:50 PM November 4, 2015

Pardon me if I'm wrong, but I believed the classic car market is artificially inflated - with classic car fakes. Refer to Bloomberg's article: article could answer your question to the sudden increase of classic cars being sold at auction houses, classifieds, etc. Selling nostalgia is a thriving business - especially for classic cars.

pilouil at 10:26 PM November 3, 2015

Currently one thing that is striking is the number of cars for sale - it seems like all owners are trying to take their profits from the exuberant market, but there are signs it's already too late, since one can see the same cars available for longer times, even with price reductions (which remain modest however). There will probably not be a violent crash though, because the new owners who have just overpaid their cars are wealthy enough (or so they think, at least) to wait for better times to exit the market. So the prices will be stable for a while, with the effect that less ans less transactions will occur, until these new owners realise there is no prospect for any return from their investment, and they will leave the market (taking their losses) which will gradually return to normal.

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