On Thursday evening, a very rare 1962 Ferrari is expected to sell for more money than any car has ever fetched at auction. Experts expect the gavel at the Pebble Beach Concours d’Elegance to clack somewhere between $50 million and $75 million (a similar model sold last year for $52 million).
All the zeros aside, snapping up this precious chunk of red metal would be far easier than buying a brand new Ferrari. The drill, for those with the cash to spare, usually goes something like this: you know a guy, get on a list, put down a deposit, buy a used Ferrari (or two), and then wait and wait. It’s exceedingly rare that a dealership will call with any potential new cars — Ferrari produces only about 7,000 per year — before any of that happens. The calls generally go out before the cars are shipped from Italy, so a prospective buyer in most cases agrees to buy the car sight unseen. If you pass up the purchase, good luck ever getting another call from Ferrari.
Among petrolheads, Ferrari’s finicky sales strategy is almost as legendary as its machines. It has created one of the world’s strangest markets and burnished resale values long after competing models have rolled onto scrap heaps.
Scarcity is at the root of the profit equation. Ferrari has never made a lot of cars. Last year, Fiat (F:IM), the brand’s parent, cut Ferrari production by about 5 percent, making less than 7,000 cars. In turn, sales for the brand rose by 5 percent and profit surged 9 percent. As Ferrari slipped into a sweet-spot on the supply-demand curve, revenue per delivered vehicle surged to $334,000 from $301,000.
Dealerships typically make more profit selling a used Ferrari than a new one; they also control the new car waiting list. So any serious buyer is advised — or at least strongly encouraged — to buy a pre-owned model first.
That’s just how it works, according to Joe Adams, president of the Ferrari Club of America, which counts 5,500 members (including 200 or so who don’t own a Ferrari). Adams, an Indianapolis-based tech entrepreneur, bought three used Ferraris before he managed to drive away in a brand new one. His latest purchase, in 2011, was a 458 Italia that had a starting sticker price of about $225,000.
“You basically have to get up to the top 50 on the waiting list, I would say, to be sure you’ll get a car,” he says. “It’s taken me almost 20 years to get to No. 20.”
Most would-be buyers don’t know where they rank on the list, a crucial bit of opacity that further primes demand and purchase prices. And those who manage to buy a new Ferrari can immediately flip it for a $30,000 to $50,000 profit, according to Adams. That’s the cost of doing an end-run around the waiting list, but that isn’t looked upon kindly by dealers. In Ferrari-land, it’s is akin to going muddin’ in a 1957 Testa Rossa. “At that point you’re blacklisted by the dealers,” Adams said. “You’re basically a persona non grata.”
There’s not just one waiting list, either. The second list, kept at Ferrari headquarters in Maranello Italy, trumps the dealers’ roster of prospects. To get on that list, a person needs to own at least five vehicles with a prancing pony badge, one of which has to be a limited production model (read: very expensive). When Ferrari does a small batch of cars, like the 500 LaFerrari hybrids it is stamping out this year, it’s the second list folks that get invited to the factory to ogle them. If the guests like what they see, they can place an order.
Adams says most Ferraris don’t depreciate for about two years. Values generally tick down in years three through nine and then level out. Eventually, popular or limited run models will appreciate and eclipse their original price. “If you’re smart about it, you can buy one, drive it for about 10 years, and then sell it for about the same amount,” he says. “Your only expense is maintenance.”
So what’s this famous Ferrari really worth — the one that goes on the block tonight on the edge of the Pacific Ocean? In the fine-art market, most economists and historians assume a fair-sized chunk of value comes from how rare a piece is, current trends and the taste of a particularly affluent buyer. In short, a piece is worth what someone is willing to pay at the moment. Lately, that’s been quite a lot.
Here’s a look at how the 39 models have appreciated over time as charted by Hagerty Group, an insurer that specializes in classic cars.
University of Chicago economist David Galenson has a different take. He argues that value comes from how innovative a work is and how much it influences future artists.
“Anybody who says that scarcity creates value is an idiot,” he says. “There are rare things all over the place that aren’t worth anything. … But you show me a high price, I’ll show you an important painting by an important painter.”
By Galenson’s logic, the value of the 250GTO Ferrari doesn’t come from its rarity — or all the little hurdles Ferrari dealers put in front of buyers — but from how cutting edge the vehicle was in 1962 and how many designers in the years since have tried to ape the curves that Enzo and his team made famous.
“I don’t think, in general, people that spend a lot of money on things are idiots,” Galenson says. “This car is valuable because it represents an innovation.”
