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Prancing Horse Trading

Winston Goodfellow

If you owned one of the world’s most coveted cars, one of the only three dozen Ferrari 250 GTOs ever made, what would it take for you to willingly part with it? Would the chance to acquire another 250 GTO plus 20 other Ferraris of various vintages be sufficient enticement?

Early last year, a Northern California businessman who operates multiple car dealerships and is an avid car collector took advantage of such an opportunity. He sold his 1962 Ferrari 250 GTO, which he had regularly raced in vintage rallies since acquiring it nearly 30 years ago, for a price said to be about $27 million. The businessman then turned around and purchased 21 Ferraris from the collection that belonged to Kroymans, the Dutch Ferrari distributor that went bankrupt in 2009. The acquisition included a 1963 250 GTO. This car might lack the racing heritage and bulletproof provenance of the $27 million vehicle, but it is a treasure nonetheless.

The businessman planned to sell most of the Kroymans cars, but not the 250 GTO. He is keeping that car so that he can remain a member of the 250 GTO club, a very exclusive fraternity. The desire to belong to the club heats up when a major 250 GTO event is approaching, and this in turn usually leads to a flurry of transactions. Market watchers expect a few 250 GTOs to change hands in the coming months, prior to the Pebble Beach Concours d’Elegance, which in August will commemorate the 50th anniversary of the car. The celebration will come a year early so that it does not conflict with a 50th anniversary road rally that will take place in the summer of 2012 in Europe.

The demand for 250 GTOs and certain other Ferraris is such that the market for these cars has remained immune to the effects of the economic downturn. The financial world, on the other hand, may have changed forever on September 15, 2008, when Leh­man Brothers declared bankruptcy and soon thereafter the Dow lost 25 percent of its value.

Despite the Dow’s rebound, uncertainty still grips the market and the economy. Witness investors’ flight to safety—to the historically low-yielding Treasury bills, notes, and bonds. Those seeking neither high market risk nor miniscule returns could consider parking their money in another instrument, one with a strong track record of appreciation and, for the last two decades at least, little volatility. The word park is particularly appropriate here, for that alternative instrument is the right Ferrari.

Advice from numerous collector-car-market experts, auctioneers, informed collectors, restoration-shop owners, and collector-car dealers yields a consensus: For the past 20 years, certain Ferraris, most notably the 250 GTO, have handily outperformed the stock market in the short and long terms.

 

As with a stock purchase, acquiring a Ferrari requires research. Instead of P/E ratios, dividend payout history, debt load, free cash flow, and 50- and 200-day moving averages, a buyer will need to know the car’s provenance (its history from the day it was made), the total number of cars produced (rarity is, of course, valued), whether the car retains its original engine and coachwork (authenticity matters), its current mechanical and cosmetic condition (a proper restoration will be costly), and whether it comes with "books and tools" (the manuals and tool kit that came with the car when it first left the Ferrari factory).

A buyer also should remember this before writing the check and enjoying the thrill of driving his or her asset (a benefit no stock certificate offers): Not all Ferraris are immune to price instability and depreciation. "Those that have truly outperformed the Dow since the Lehman bankruptcy—and over the past two decades—are the A-list cars," says David Gooding, president and CEO of the automobile auction house Gooding & Company. "These are the truly great Ferraris built in very limited numbers, with race history, custom coachwork, or a combination of the two."

Included in this top tier would be such rarities as the 1957–58 250 Testa Rossa, of which Ferrari built only 21; the 1958–63 250 GT Spyder California, which had a production run of 104; and the 1959–62 250 GT SWB, which had a production run of 165. The A-list benchmark remains the 250 GTO, a car valued as much for its beauty as for its rarity or racing heritage.

Ferrari built only 36 examples of the 250 GTO Series I from 1962 to 1964 (and three examples of the Series II in 1964), and in all three of those years the car won the world championship of its racing class. In addition to the 250 GTO that funded the Kroymans-collection acquisition, others have been involved in recent notable transactions. Last spring, for example, British radio host Chris Evans acquired a 250 GTO belonging to Japanese collector Yoshiho Matsuda in exchange for cash and a number of cars from Evans’ collection. The total value of the cars, which included a 250 GT Spyder California, and the money was said to be $17 million to $20 million.

The 250 GTO and 250 GT Spyder California are among the A-list models that have their own pecking orders based on design or specification differences. The value of a 250 GTO Series 1 usually is about 20 percent greater than that of a Series II, because the Series II, though a much rarer model, lacks the slinky silhouette of the Scaglietti-designed Series I. Similarly, a Spyder California SWB (short wheelbase), which Ferrari made from 1960 to 1963, is generally more valuable than an LWB (long wheelbase), which was produced from 1958 to 1960. A Spyder California with covered headlights could have more value than one with uncovered, or open, headlights, and a lightweight alloy body is preferable to a steel one.

A car’s racing history can be just as significant as its construction. In fact, racing history might have an even greater influence on a car’s value. At Gooding’s Pebble Beach auction last August, a 1959 Spyder California LWB with covered headlights, an alloy body, and an impressive competition heritage sold for $7.26 million, a record for a California LWB. The car finished fifth overall at the 1960 12 Hours of Sebring and fifth at the 1959 Bahamas Speed Week. By contrast, a steel-bodied 1959 California Spyder LWB with covered headlights and no racing history sold for $2.6 million that same weekend on the Monterey Peninsula, during an RM Auctions sale.

Other factors can compensate for a lack of racing heritage. Also at the RM Auctions sale, another A-list Ferrari, a 1954 375 Mille Miglia Berlinetta, one of only 30 made and one of only seven equipped with a 340 hp, 4.5-liter Lampredi engine, sold for $4.62 million. This MM was built to race, but it never did. However, the car does have some celebrity cachet. It appeared with Sophia Loren and Mar­cello Mastroianni in the 1955 Italian film La Fortuna di Essere Donna (Lucky to Be a Woman).

The 250 GTO sold by the Northern California businessman has an extensive and impressive racing history. It also had been in the businessman’s possession for a long time, since 1983. Duration of ownership can make a difference to buyers, according to Simon Kidston, a Geneva-based classic-car expert. "The market is becoming increasingly polarized," Kidston says. "A-list buyers only want the best—a car that is the best and perceived to be the best. For instance, the car that has been tucked away for years and never been able to be bought versus a car that is heavily shopped. Even though they are identical, the former will command a premium price."

Matsuda, the Japanese collector, also had owned his 250 GTO for a long time, having purchased it in 1996. It, too, has an impressive racing résumé, but the car had been shopped around quite a bit before it sold last year. Perhaps that is why Evans was able to acquire it for the relatively bargain rate of $17 million to $20 million.

The a-list cars (see "Also on the A-List," below, for other top-tier models) constitute the highest of three distinct tiers of Ferraris. They sit atop the midrange cars and far above the production cars of the past 25 to 30 years.

"The high end of the midrange cars is a 275 GTB/4," says Brandon Lawrence, proprietor of Sports Cars Italiano in Northern California. The 275 GTB is a sleek, voluptuous fastback that Ferrari made from 1964 to 1968, and of the 770 that the company produced, 330 were the GTB/4 version or "4-cam," as it is often called. The name derives from the lusty V-12 engine’s four overhead cams that boosted the car’s top speed from 150 to 160 mph; Ferrari equipped the earlier 275s with less powerful two-cam engines.

Unlike the prices of the A-listers, those of the midrange Ferraris suffered from the stock-market collapse. "Their values got overheated in 2008," says Lawrence, noting how he sold a perfectly restored 4-cam for "north of $1.7 million in the first half of 2008; that car is probably worth $1.2 million today. Four-cams in not-that-good conditions are worth less."

Other midrange Ferraris that plummeted 30 percent to 50 percent in value two years ago and have not fully rebounded with the Dow include the 365 GTB/4 Daytona coupe and the 365 GTS/4 Daytona Spyder, which had production runs of 1,284 and 122, respectively, from 1968 to 1973; the 250 GT/L (also called the Berlinetta Lusso), of which Ferrari built 350 examples from 1962 to 1964; and the 330 GTC and GTS, which had production runs of 598 and 100, respectively, from 1966 to 1968.

Experts consider the 250 GT Coupe the entry-level midrange Ferrari. A handsome car bodied by Pininfarina (thus its PF Coupe nickname), the vehicle had a production run of 353 from 1958 to 1960. Depending on the car’s condition, its value can range from $150,000, if it needs a complete restoration, to $300,000, if it is concours-ready.

But beware the buyer who purchases the fixer-upper. A run-down Ferrari is different from a ramshackle house, which—once upon a time, at least—could be promptly renovated and flipped for a quick profit. The cost of a truly correct restoration for a midrange Ferrari can exceed $300,000—and all that work still might not elevate the car to concours-level standards. "My advice," says a highly regarded Ferrari restorer who asked to remain anonymous, "is to buy the best car you can afford. So many people think they can get one cheap and make it up somewhere else. It simply does not work that way, unless you have an engineering and bodywork background and can do topflight work yourself."

Concours do matter to many collectors, because a class victory, especially at the Pebble Beach Concours d’Elegance, can enhance a car’s provenance and value. "It shows the car has had a $400,000 to $1 million restoration, and that it has been judged by people who really know these cars," says Tom Shaughnessy, a Southern California–based dealer in rare Ferraris and rare Ferrari parts. I’d say a class placing bumps the value 10 percent. It also gives the owner bragging rights. It shows the car is truly world-class."

But to achieve victory at a concours or place near the head of the class, a car must be extremely authentic. "If a restoration has been performed that is a total rebody, where none of the original panel work is left," says Alan Boe, Pebble Beach’s chief judge of the Ferrari classes, "it is an automatic five-point deduction." The concours uses a 100-point judging system, and "if you score below 98.5 points," Boe says, "you really don’t have a chance of even placing."

The primary difference between the mid-level and bottom-tier Ferraris is production volume. In the 1950s, a Ferrari model production run typically numbered fewer than 100. In the following decade, the company produced hundreds of each model. Since it introduced the mid-engine Testarossa of the mid-1980s (of Miami Vice fame), Ferrari has been making almost all of its models in the thousands. Testarossa production, from 1984 to 1996 (including the 512 TR and 512M variants), was just shy of 10,000, and the 355 and 360 mid-engine V-8 models were even more popular, with production runs of more than 11,700 and 17,500, respectively.

"Insiders call such cars shrapnel," Kidston says. "These are new-model Ferraris that some owners use to exchange for a better car. The car either goes to auction or a trade outlet because they don’t hold their value. The insiders try to have it sold before they complete the deal to buy it."

Lawrence, the owner of Sports Cars Italiano, was selling new Ferraris in the 1980s and recalls that during the decade’s debt-infused collector-car bubble, new Testarossas "were selling for double their sticker price [or more than $250,000] in the secondary market, and dealers had waiting lists. Today that car is worth maybe $45,000 to $50,000."

The large production volumes may be the main reason for such precipitous drops in value. But Steve Serio, an exotic-car and collector-car dealer in Massachusetts, points to another reason, one that is evidenced at a Ferrari service and light restoration shop near his business. "In the past 18 months," he says, "the owner concluded that he had to start doing Porsche and Mercedes service as well, because the Ferraris reached a point where people weren’t willing to spend the money to service them. They are so service intensive, or have the perception of being service intensive, that even if a car were free, most anyone would ask, ‘Has it been serviced?’ "

The $50,000 Testarossa should undergo a major servicing every three to five years, at a cost of $10,000 to $14,000. The V-8 models can be equally expensive to maintain, especially those with the paddle-actuated F1 transmission. "The transmissions don’t break often," Lawrence says, "but the hydraulic pump on a 355 is $9,000, $16,000 on a 360, and $26,000 for a 430." Those costs—or would-be-owners’ fears of incurring those costs—reduce the value of the cars.

Buyers can expect serious depreciation on almost every production model of the past 30 years, including the new 458, after it has been in production for several years. But there are exceptions. These are the instant collectibles: limited-volume models, such as the 288 GTO (272 produced from 1984 to 1986), that have never sold below their original sticker price and can command more than twice that price now. When 288 GTOs entered the secondary market, they sold for double their sticker price, and the prices continued to rise. The other instant-collectible Ferraris include the F40 (1,311 made from 1987 to 1992), the F50 (349 made from 1995 to 1997), and the Enzo (400 made from 2002 to 2005).

Although the higher-volume production cars occupy the bottom rung of Ferraris and generally do not represent prudent investments, they can offer tremendous value for their prices. Most of the midrange values continue to rebound, but they have a ways to go before reaching their pre-Lehman-collapse highs. As for the A-list Ferraris, one collector who owns several such cars says, "No one is chasing anything; the A-list cars are bringing real but not stupid money."

Still, the tempered demand has not discouraged a collector who made his fortune on Wall Street. When asked if he had diversified any of his holdings into gold, the current stealth bull market, he replies, "No." Then after a moment he adds, "I felt I didn’t need to. All my precious metal is in the garage."

Future Concours Stars
The formative years of Ferrari, the early 1950s to late 1960s, coincided with a boom in Italy’s custom-coachwork industry, when cars were created to bring attention to the manufacturer, the coachbuilder/designer, an important client, or all three. The Ferrari name carried the most prestige because of its cars’ championship-winning heritage and superior road performance. Ferraris therefore became the favored chassis for coachbuilders. The cars they created are the ones that have excelled at concours. But America’s enactment of safety regulations in the 1960s and the global economic downturn in the 1970s eliminated the demand for custom coachwork.

This leads to the question of which cars will appear at Pebble Beach 30 years from now, after all the great Ferraris from the early years have been shown multiple times. Potential future stars include the Zagato-bodied 575 GTZ (only six have been built) and Pininfarina’s one-of-a-kind P4/5 from 2006. Other candidates are the 456 Venice series and the FX, both built in batches of six for the royal family of Brunei.

Also on the A-List
If you want to gain entrance to the A-list club, keep your eyes open for a 250 GTO, a 250 Testa Rossa, a 250 GT Spyder California, a 250 GT SWB, a 375 Mille Miglia, or any of the following cars. And be prepared to spend at least $3 million.

  • 375 Plus (seven made, primarily as competition cars, in 1954)
  • Special-bodied 250 GTs and 410 SAs, including the 250 Zagato and Superfast 1 (perhaps 10 to 20 of the street cars made from 1955 to 1962)
  •  290 MM (four competition cars made in 1956)
  • 315/335 Sport (six competition cars made from 1957 to 1958)
  • TR58, TR59, TR60 (10 competition cars made from 1958 to 1960)
  • 250 P (four competition cars made in 1963)
  • 330 P4 (three competition cars made in 1967)
  • 275 GTS/4 NART Spyder (10 cars made from 1967 to 1968)
  • 312 P (three competition cars made in 1969)
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