With the upcoming auctions during the Pebble Beach Automotive Week many people ask us what will happen with the classic car prices. Will they go up as much as last year?

The value development of the classic Ferrari market in the future is hard to predict. We know the number of cars is fixed, global wealth is growing, so one can assume demand is growing and prices will go up. But in recent years prices of classic Ferrari’s have gone up more than usual. Perhaps prices have reached an ‘unnatural’ level. What has happened and what consequences does this have for the future value developments of classic Ferrari’s?

Since the start of the financial crisis in 2007 there have been several external circumstances, which have had an important influence om the classic Ferrari market:

  • Distrust of the financial markets; many investors reconsidered their asset allocation and moved a lot of investment money to alternative investments, such as classic cars;
  • Historic low interest rate: interest rates on saving accounts are extremely low, which leads to investments in alternative investment options, such as classic cars;
  • Growing wealth: Despite the financial crisis the wealth grew in the most important traditional Ferrari markets (USA, Europe and Japan).

 

These external factors have led to more transactions of classic Ferrari’s in 2009-2011 which resulted in a strong price increase. In relation to many other alternative tangible investment options, such as: art, wine, stamps and coins, classic cars performed significant better, which wasn’t unnoticed by the media.

Financial Times Article Performance Alternative Investments 22-feb-2013
Financial Times 22 February 2012

In many publications all over the world classic cars were named as interesting investment options, which had a reinforcing effect and attracted a new buyers group, the speculators.

Today 5 types of buyers/ owners of classic Ferrari’s can be identified:

  • Traditional enthusiasts: the true passionate car and Ferrari enthusiasts, people who own one or a few Ferrari’s. This group is the backbone of market;
  • Collectors: a growing group of buyers, sometimes coming from the group of old fashioned enthusiast, but sometimes also completely new in the market. These buyers often have deep pockets and are usually responsible for the extreme price increases of the classic Ferrari icons;
  • Social collectors: a new target group of people who have enough money and buy classic cars as an accessory;
  • Investors: people who want to make money by investing in cars, with their own money and for a longer period of time;
  • Speculators: people who want to make quick money by buying and trading cars, with their own money and sometimes with loans for extra leverage.

The external circumstances in combination with these buyers were responsible for an increasing number of transactions of classic cars and increasing prices in the last 5 years.

Regarding the value development of classic cars in the future the externals factors as well as the buyers should be considered.

Financial markets
The confidence of investors in the traditional investment markets had improved since the financial crisis. Many stock markets have done well, but still