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.