By on February 2, 2009

Following the Scottsdale auction season, dealers at the top end of the collector car market breathed a collective sigh of relief. As the the New York Times headline put it, the auction action proved that prices “Soften but Don’t Crash.” Maybe so, but there’s a hidden dynamic involved. “People tend to forget that the auction houses work just as hard at reducing the sellers’ price as they do on getting the buyers to pay it,” says Mike Nicholl, proprietor of Las Vegas’ Classic and Collectible Cars. In other words, the results simply reaffirm that car sellers’ willingness to take a hit currently matches buyers’ bargain-hunting budgets. The General Manager of Lamborghini Bergen County (NJ) agrees. He says pre-owned inventory levels are up, but the deals are still going down. “More people are hurting, looking to get out of their cars,” Alan Greenfield says. “But the lower prices are attracting new buyers.” Despite the market’s recent diet of anti-gravity pills, or at least away from the people dispensing same, there are signs that the high end market is headed for collapse.

For one thing, Chase has cut bait. The bank was a major player in the luxury car business, financing purchases across the entire range of exotica. Now, nothing. Manufacturers’ finance companies (e.g., Bentley Finance) have jumped into the breach (dear Horatio), but the bank didn’t leave the market because it wanted to.

“Business is way off,” reveals Beverly Hill Rent-A-Car‘s Marketing Manager Kurt Seijkowski. The California car company will rent you a Bugatti Veyron at $25k per day (plus plus plus) or a Lamborghini Gallardo at $2500 per day (50 free miles). Seijkowski reckons rentals are off by at least 30 percent.

More startling: his inventory acquisition cost. “Last year, I had to pay $225 to $230k for a low mileage Gallardo. I can pick up the exact same car for $165k.”

Last year, Chris Kelly of Premier Motor Cars of Sioux Falls (SD) sold a customer a 400-mile Ferrari F430 Spider for $325k. By August, the price was down $289k. It’s now on sale for $239k. Kelly will take $235k.

As always, there’s a feedback loop in play. High end buyers expect the market to collapse. So they wait. By waiting, they put pressure on the prices to collapse. Dealers– surprise– are exploiting this herd mentality for their own benefit.

“Ferrari dealers want owners to believe the market has gone soft,” Kelly says. “They’re telling Spider owners that their cars are only worth $150k. But you try and find one for under $200k.” 

At some point, whether collector car or top end whip, pre-owned high end car prices will stabilize. But we’re not there yet. Not by a long chalk. Prices may be sinking quickly or slowly, but down they go. Anyone who says otherwise would be happy to buy your car for a fire sale price or sell you a car for… whatever they can get.

As for the price of brand new top end metal, well, that’s another story. One we’ll tell tomorrow.

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23 Comments on “High End Pre-Owned and Collector Car Market Teeters on the Brink of Collapse...”


  • avatar
    yankinwaoz

    $25k a day to rent a car. The mind boggles on how that can be justified in any way what so ever.

  • avatar
    Martin B

    5k rental, 20k insurance.

  • avatar
    thalter

    Considering the 25K is for a million+ dollar car with 1001 HP that you just gotta try out, that doesn’t seem to unreasonable.

  • avatar
    no_slushbox

    yankinwaoz:

    Movies and rap videos, yo. Just don’t let Eddie Griffin drive.

  • avatar
    toadroller

    This market cannot fail; please, send Federal help!

    … or maybe we can watch and learn as this market corrects itself with a few painful casualties.

    Hmm.

    • 0 avatar

      America has always been in a boom and bust cycle. Problem is, with over 10% unemployed and closer to 20% underemployed, the problem is that without federal money, the contraction will continue to destroy jobs that probably aren’t coming back until thee next major boom. But the big question is, what will the next boom be?
      WW2 was a boom.
      The internet was a boom.
      the wars following 911 were booms.
      What’s next?
       
      Truth is, we need a REAL WAR this time around that effects EVERY MAN WOMAN AND CHILD.  Just like WW2.  These wars we are fighting now are bullshit.

  • avatar
    no_slushbox

    The market for cab forward, crew cab, stake bed trucks is really in trouble.

    You can rent this crazy thing for only $75 a day:

    http://www.bhrentacar.com/vehicle_info/178/0

    I’ll take that over the Lambo.

    Or this:

    http://www.bhrentacar.com/vehicle_info/213/0

  • avatar

    I weep not

  • avatar
    like.a.kite

    235k for a used F430 convertible is because they’re so hard to get in the first place, new or otherwise.

    The picture is rather pleasing to look at. This is related.

  • avatar
    jmo

    “$25k a day to rent a car. The mind boggles on how that can be justified in any way what so ever.”

    Think of it this way: would you be willing to rent it for two weeks pay? I wouldn’t, but I bet some people in this board would. If you make 650k a year(this would include any number of doctors, lawyers, executives, sucessful small business people, etc.) 25k is two weeks pay.

  • avatar
    AKM

    Is there a specific reason why that Ferrari is parked on a handicapped parking spot?

  • avatar
    Landcrusher

    The problem with the whole economy is that this hasn’t happened to the rest of it. With a few exceptions, you aren’t seeing 35 to 40% off on things that you usually can’t find similar sales for during normal times. However, all the buyers are sitting on their cash waiting for the deal of a lifetime because they are hearing everyday how bad the economy is. If I could buy real estate in my area for 2000 prices, I would be willing to do it, but I ain’t buying at 2007 prices which are what most of the decent foreclosures are asking until they get to auction.
    IOW, the media and politicians have me convinced to wait for a bankruptcy sale, and by my doing it, I may help create more bankruptcies.

  • avatar
    stuki

    @yankinwaoz,

    For one, you may be able to haggle. Lots of guys don’t, as their girl stands next to them and their ego is wound tightly around their wallets, but you can always try. If the Veyron breakdown is like Martin B states, haggling might be a bit problematic. Maybe your Amex rental insurance would cover it :)

    Also, driven like intended, you mighht well be able to put $25K of wear on a Veyron if determined enough. Remember the distance from Beverly Hills to the Mojave Dessert ain’t all that. Especially at Veyron speeds. Now, you also need to factor in the cost of a Cessna flying overhead to spot for Cops (and other motorists), but, plus a few scouts in lesser cars, but who’s counting….

    Another salient point is that most of these hyper exotics sound a lot cooler than they are. Once you drive them for a day, you may well realize they kind of suck. So spending $25K to save you from buying one for a mill, might not be so bad.

    What scares me is all the coke and speed that likely gets consumed by those wanting to get the most ‘value’ for their $25k.

  • avatar
    jmo

    “What scares me is all the coke and speed that likely gets consumed by those wanting to get the most ‘value’ for their $25k.”

    Ah, the gold old days – I remember them well. Can’t say I didn’t get my money’s worth…

    :-)

  • avatar
    DearS

    What people really need is to learn to drive better, more patience, more humility, more serenity, more responsibility, sensitive, emotion and balance. Ironically you learn those things by accepting that you must make do without such a vehicle and the groupies. LOL

    The Veyron IMO does not look better or worse than most mainstream cars, at least in picture. Its power is useless in getting me to work or any place any faster. And its price is irrelevant to my world. In other words I have no need for a Veyron or any other car outside my budget range. So prices keep coming down, cause I wanna see what else there is to such highly tuned machines.

  • avatar
    rodster205

    AKM : Is there a specific reason why that Ferrari is parked on a handicapped parking spot?

    Good catch! Because those are always the only spots open in any parking lot…

  • avatar

    25k. Twenty Five Thousand.

    For less than two days of a Veyron, you can get a Legacy GT, and build it up to ~450WHP.

    (insert your favorite normal performance car instead of LGT and the statement still may work)

    If you really want to have fun, why go for something worth so damn much, that you’re afraid to ever have fun with it?

  • avatar
    H Man

    The 25 large for a day of Molsheims best isn’t what it’s cracked up to be. From the fine-ish print:

    “Rental Rates

    $25,000.00 per day.

    $**For Picture Car Only** per week.

    0 miles per day included.

    $0 per additional mile.”

    25 grand and you can’t even drive it.

    H

  • avatar
    Jeff Waingrow

    RF, you hit it on the head. Robert Schiller, in his book “Irrational Exuberance”, talks about positive and negative feedback loops. Each trend becomes self-reinforcing and can eventually form an avalanche. Witness the current economy and world stock markets. Witness also the reluctance of banks to lend. Unless there’s a powerful force to alter one of these trends, it can lead to an awfully bad place. No matter your politics, pray the economic stimulus plan works.

  • avatar
    jerry weber

    There is a theory, that now is the time to buy collectables like exotic cars. Forgotten is that you need buyers with disposable cash. These cars have no real value, just whatever you can sell it for today. The Arizona and other auctions have aqttracted much celebrity money and made prices go through the roof. However, the broad market will not support these prices and there is no reason to believe that celebrity status will make these cars worth what they brought at the auctions. Now is the time to sit tight for people who need to cash out, it happened before.

  • avatar

    For the record, I was offered a brand new Gallardo, complete with glass engine cover and some reasonable options, for $165K last summer, so think there’s a little bit of deliberate hype involved here.


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