When Enzo Ferrari, the 90-year-old racing impresario, died at his home in Modena, Italy, in August 1988, the same question crossed the minds of car buffs the world over: What effect would il Commendatore's death have on the prices of the legendary cars that bear his name? For the past several years, as word spread that Ferrari was growing frailer, the cars had been appreciating about as quickly as it takes a Testarossa to go from 0 to 180 mph. Most observers believed that the climb would accelerate once the cars' abrasive and eccentric creator died, because only the cars made before his death could be considered "pure" Ferraris. So in the year and a half before the old man died, speculators kept bidding up the prices of his cars.
Such is the auto world today. The stock of many different cars has been soaring as collecting has become a popular hedge against volatile equities markets. Seasoned Aston Martins, Lamborghinis and Maseratis are among the hottest, and costliest, makes today. But no postwar make, no matter how fancy or fast, has matched the remarkable sprint up the price ladder that Ferraris have taken. Says David Brownell, editor of Hemmings Motor News, which caters to car collectors and runs almost 800 pages of classified ads per month, "The action in Ferraris has gotten so fast that you need a ticker tape to keep track."
Indeed, car collectors gasped five days after Ferrari's death, when auctioneer Rick Cole sold a 1963 Ferrari 250 P for a then public-auction record $2.7 million in Pebble Beach, Calif. Since that sale, records continue to be set. The most recent high was reached this summer, when a 1963 250 GTO, one of only 36 such vehicles ever made, fetched a reported $11 million in a private sale to an anonymous buyer. The Ferrari frenzy is such that even the new cars, of which there are 4,000 each year, appreciate the minute they hit a dealer's showroom floor. While at one time only the 12-cylinder race-bred models weakened the knees of Ferrarophiles, some of the sixes and eights are attracting a good deal of interest. People seem willing to do almost anything to own a Ferrari, even if it means making do with those less powerful but more affordable alternatives. Jack Cowell, a managing director for a Manhattan investment banking house and a former Ferrari owner, says, "Ferraris are no longer perceived by the market as just autos. They are now rolling art."
Unfortunately, the automobile buffs who enjoyed driving Enzo Ferrari's magnificent creations are being elbowed out of the market by the new breed of owner—the deep-pocketed investor who doesn't know a crankshaft from brake calipers but can quote you the latest record-breaking prices. Even the true Ferrari lover who can resist the temptation to peddle his car for a big profit dares not drive the car on the street because of huge insurance premiums: It's tough enough to prang a car you love, but how can you justify risking a multimillion-dollar objet d'art on a trip to pick up a quart of milk? Insurance premiums run as high as 10% of the value of the car, and they sometimes come with restrictions, such as no racing and even no driving, period.
October 22, 1989
"You see fewer and fewer of the classic Ferraris on the road," says Michael Sheehan, owner of European Auto Sales and European Auto Restoration in Costa Mesa, Calif., and a Ferrari racer as well. Says Thomas W. Barrett III, a Scottsdale, Ariz., car collector and dealer, "Nine of 10 Ferraris sold in this market won't be driven anymore."
That development especially dismays the purists. "Turning a Ferrari into a car strictly for display purposes really hurts," says Gerald Roush, editor and publisher of the Ferrari Market Letter. "When you do that, you are admiring the bodywork, which Ferrari usually had done outside the company. Ferrari built the engine, the gearbox and the chassis. The real way to appreciate this car is to drive it."
There is no shortage of opportunities to do just that—provided you are willing to pay for the privilege and are willing to take the risks. Vintage car races have become increasingly popular. They can vary from casual spins around a race circuit to reenactments of famous races, such as the Mille Miglia in Italy, to real fender-banging races. Whatever the format, vintage car races provide enthusiasts with an opportunity to meet one another, admire one another's vehicles and, most of all, drive their cars as hard as they dare.
Yet Ferrari owners feel they can't win. It's not just that they think their cars are too pricey to trade paint with mere Jags and 'Vettes. Sheehan points to another reason. "The Ferraris aren't at many vintage races because they are getting beaten. It's considered bad form to upgrade a million-dollar Ferrari, and it would decrease its value if you did, whereas everyone else is upgrading their vintage cars with contemporary racing technology. As a result, the Ferraris just can't compete."
Stanley Novak, a former Ferrari dealership manager who has owned a dozen Ferraris in the past 30 years, says the few he sees at vintage races are lower-priced versions, not the expensive classic racers. "I know of only one million-dollar Ferrari that is still racing," says Novak. "It became so costly that to keep racing, some guys went out and bought newer Ferraris that were not worth nearly as much as their old ones."
In short, it's gotten so that Ferrari owners can't have fun with their autos. "Fewer and fewer of the true enthusiasts can afford the car anymore," says Roush. "The people who have been coming into the market lately are doing so not because they love Ferraris but because they love making money."
Consider what happened to an East Coast investment banker who requests that he remain anonymous. He had always lusted after Ferraris, but it wasn't until he hit age 42 that he decided he would go out and buy one. That was in the spring of 1985, and he paid $61,000 for a red '66 275 GTB, a model that had sold for $14,000 when it was new. "I paid one of the highest prices ever for a 275," he says. "But I went ahead with the deal because I thought the car would maintain its value."
Three years later an appraiser informed him that his car was worth $400,000. That came as a shock, but it wasn't all pleasant. Insuring the car became onerous. Furthermore, costly as the coverage was, the banker discovered that it constantly lagged behind the continually soaring value of his GTB.
The best thing about a Ferrari, as far as he had been concerned, was driving it. Nothing sounded or felt quite as good as the crescendoing roar of that 12-cylinder engine as the needle on the tach approached its 7,600-rpm redline. However, with the Ferrari's selling price continuing upward, he began to fret about accidents, parking-lot dents and, most of all, theft. He found himself leaving his Ferrari in the garage more and more. Finally, he decided to get rid of the car. Four years after he bought the Ferrari, he sold it for $750,000, an increase of more than 1,100%.
The huge price tags have raised questions about what constitutes a true Ferrari. Many of the Ferraris bought and sold today are not the car that left the factory. Take the 250 GT that Cowell used to own. "It had the original engine, chassis and gearbox," he says. "But it had been reskinned—it had a new body. While that was done properly, it wasn't the exact car that had left the Ferrari factory 23 years earlier." In extreme cases, restoration specialists have been known to re-create entire autos from little more than an identification plate. Some observers argue that getting a Ferrari back into driving shape is a laudable pursuit, no matter how it is done, but purists believe recreations cheapen the market. They figure that if Ferrari made 454 of the 275 GTBs, then that's all there should ever be of that model.
This dispute wouldn't amount to much if recreations were properly represented when they are sold. Trouble is, the recent price hikes have tempted some profiteers to try to pass off re-creations, or even complete counterfeits, as originals. Cowell believes the problem is manageable. "Many of the Ferraris, especially the real classics, are registered and very well known," he says. "They can be easily checked out by anyone who is willing to do a little research."
Cowell can afford to be sanguine. His Ferrari was featured in several magazines for its racing successes, and after each story he was offered ever higher amounts for the car. Eventually he sold it for a price that surprised even him, and he now has an Elva Spider 001, which he races with abandon in vintage car events.
The speculative market surrounding Ferraris has been fueled partly by the car's racing history—no other marque has won as many Formula One events, and Ferraris have won at Le Mans, the Targa Florio, Daytona and Sebring—and partly by supply and demand. Perhaps 55,000 Ferraris have been made since 1947, the year the car was introduced. General Motors cranks out that many cars in less than a week.
Some Ferrari owners believe their cars afford them a chance to be a part of history. But many of the new breed of owners have a far less romantic reason for writing seven-digit checks for their cars. Since the Wall Street crash in October 1987, interest in collectibles of all kinds has increased. A lot of nervous investors have diversified their portfolios, moving some of their money out of stocks and into tangible assets, like paintings, sculptures, stamps and Ferraris. The downside to collectibles is that they pay no interest and have high insurance premiums. Then again, you can't mash the accelerator of a mutual fund.
No one is sure how long Ferraris will continue their rapid appreciation, but anytime prices rise as fast and as high as those for Ferraris have in the past few years, the possibility of a crash always looms. In May Automotive Investor, a respected financial newsletter, warned of a softening in the Ferrari market. The publication urged owners of late-model Ferraris, especially 308s and Dinos, to sell. Roush, however, remains bullish. "The market is getting a little soft for some models, but the Ferrari boom won't end until people can't make money anymore," he says. "Only then will they get out and go into some other faddish investment."
Dick Fritz, former general manager of the Ferrari North American Racing Team, says, "The value of Ferraris soared as the size of the market grew. I don't see that market diminishing. In fact, it may actually be getting larger."
One reason for the car's continued strength is the formation of two-or three-person syndicates to help spread costs around and make those $10 million autos easier to attain. "You won't see the doubling and tripling in as short a time," says Fritz, "but you won't see many lose money, either."
Regardless of what happens to the Ferrari market, it has been forever changed. The car has been taken from the enthusiast and given to the collector. An automobile famous for its performance, its power, its racing victories has become too valuable to drive.