Market Guide Madness Part II

In Part I of this piece, I addressed the concerns of the market-curious who find the discrepencies between various market and price guides to be confusing. Focusing first on the Ferrari Market Letter and quoting the FML's Gerald Roush, I attempted to shed some light on the methods used in developing his Asking Price Index and went on to explain why, in the case of older, collectible Ferraris, the FML's figures are consistently lower than those presented by its rivals and seem to fall far short of current asking prices.

In this installment, I'll be dealling with those two rivals, Cavallino and Sports Car Market, but first I want to address a question posed by one of my readers who asked why I had chosen to focus on these three sources while ignoring the other two mentioned by Mr. Roush, the Cars of Particular Interest Collectible Vehicle Value Guide and the N.A.D.A. Classic, Collectible, and Special Interest Car Appraisal Guide & Directory. To answer that question, the whole purpose of this two part piece is to address the questions and concerns of my readers and other enthusiasts, owners and market-watchers that I come in contact with. Whenever I've been asked about the disparity of various market/price guides, it has always been FML, Cavallino and Sports Car Market that were brought up. I've yet to have one single person quote either of these other two sources when expressing their confusion. If you have a specific question about the figures offered by either the CPI or NADA guides, feel free to ask and I'll do my best to provide an accurate answer.

Cavallino Guida and Sports Car Market Price Guide

I've combined the two of these into a single segment because, the truth is, they both use exactly the same method to determine the values published in their guides. To learn more about the process, I spoke to Southern California horse trader Michael Sheehan, who not only happens to be one of the "selected dealers" surveyed by Cavallino for the figures published on their Guida pages, but he also consults with Sports Car Market on the Ferrari values offered by their Price Guide. With so much in common, why then do the figures in these two currently differ, even if only slightly? The simple reason is that Cavallino updates and publishes their guide every two months while SCM does so only once per year, the result being that Cavallino's figures are more current and reflect more recent market changes.

According to Mr. Sheehan, whenever possible, the figures he provides are based on actual selling prices of Ferraris worldwide. Of course, no one can possibly know the selling price of every vintage Ferrari that changes hands, but he is very well connected within the Ferrari community, sells or brokers a number of these cars each year himself and, like me, makes it a point to watch the market like a hawk.

When actual selling prices either aren't available or just aren't abundant enough, a certain bit of common sense (something that an arethmatic formula can't provide) is called for. Michael refers to this as making "an educated guess." When putting a value on one of the rarer models, it might be the case that an example hasn't changed hands for several years. Even so, if the market is experiencing an overall up or down swing, it only makes since that the value of this particular model should follow suit. In some instances, similar models might have experienced dramatic movement within the market place, making it reasonable to assume that this car should be moving similarly. For example, if 250 SWBs and 250 TdFs are both enjoying healthy value increases reflected by recent sales figures but a 250 Interim Berlinetta (essentially a TdF with SWB bodywork) sale hasn't been recorded in years, our educated guessing would tell us that Interim prices would be affected accordingly.

Now, while this method seems to be a fairly accurate way to value some of the more common cars that change hands with some frequency, in the case of the rare and obscure, one can be, and often is, surprised by actual selling prices. After all, the buyers and sellers of 7+ figure automobiles are few and far between and what one is willing to pay or what one is willing to let one go for may have little to do with what Cavallino, Sports Car Market, Michael Sheehan or you and I think that that car is worth.

Market Guide Madness Part I

Pricing out PF Coupes or Cabs lately? How about Lussos? 4-Cams? Checked out all of the market guides only to find that you're no more well informed than when you started? You're not alone. Lately, more and more people seem to be confused by the odd disparity of Ferrari values presented in the various market guides, something that's not surprising when you consider the following:

250 PF Cabriolet series II
Cavallino (Guida Feb/Mar 05): $225,000 - $300,000
Sports Car Market (Price Guide 2005): $175,000 - $300,000
Ferrari Market Letter (Asking Price Index Feb 12, 05): $143,696

250 PF Coupe
Cavallino (Guida Feb/Mar 05): $65,000 - $125,000
Sports Car Market (Price Guide 2005): $75,000 - $125,000
Ferrari Market Letter (Asking Price Index Feb 12, 05): $57,447

250 GT/L
Cavallino (Guida Feb/Mar 05): $240,000 - $350,000
Sports Car Market (Price Guide 2005): $250,000 - $350,000
Ferrari Market Letter (Asking Price Index Feb 12, 05): $182,750

275 GTB/4
Cavallino (Guida Feb/Mar 05): $450,000 - $495,000
Sports Car Market (Price Guide 2005): $425,000 - $500,000
Ferrari Market Letter (Asking Price Index Feb 12, 05): $348,000

Now, any hominid can see that something's wrong with this picture. Is the Ferrari Market Letter trapped somewhere between the Triassic and Jurassic periods or what? Well, the answer is yes and no. Before I comment any further, let's let the Ferrari Market Letter's own self-proclaimed dinosaur, Gerald Roush, explain how he comes to the figures published in his Asking Price Index:

FERRARI MARKET LETTER ASKING PRICE INDEX
Originally published in Vol. 27 No. 22

There seems to be quite a number of misconceptions about the Ferrari Market Letter Asking Price Index published in each issue of the Ferrari Market Letter. People try to make more out of it than it is, try to make it out to be something it was never intended to be, criticize it for not being what they want it to be.

At the risk of sounding like an old curmudgeon, I believe part of the problem stems from the influx of newbies into the Ferrari world over the past decade or so. They don’t recall or can’t remember what the Ferrari world was like when we first started the regular Asking Price Index (A.P.I.)—probably because they weren’t active in the Ferrari market then. At that time, as the 80s ended and the 90s began, the Ferrari market was in a price turmoil. Prices had shot up drastically during the late 80s, in some instances doubling every year, then went into a steep decline in the early 90s.

In the earlier days of the Ferrari Market Letter, the late 70s and into the 80s, I only published a price analysis every six months—in January and July. The stability of the market in those years required nothing more. But as the market destabilized there seemed to be a need for a more frequent and up-to-date analysis. Hence the every issue format that has prevailed for the past 12 or so years.

In both its earlier incarnations and its present form any price analysis published in the FML has been calculated using asking prices. That’s why it’s called the Asking Price Index. This policy is a regular source of criticism. Why not, I am often asked, use actual selling prices? But after publishing the FML for 27 years I think I have some experience in the matter and I have yet to find any source for reliable, accurate and verifiable actual selling prices in the quantities required to make any analysis statistically relevant.

A number of solutions to this problem have been suggested. Why not use auction figures? But do dealer wholesale auctions such as Manheim truly reflect the retail market? It is the retail market where most subscribers operate. The public auctions such as RM, Bonhams, Christie’s and Barrett-Jackson tend toward the more exotic (and high dollar) Ferrari models and while a number of the more mundane Ferraris do go through these auctions the quantity is not sufficient.

What about public records? After all, when these cars are sold taxes have to be collected so why not use local tax records? I have privately invited individuals interested in reforming our price index to approach their local government bureaucracies and ask them to extract such information on Ferrari sales. To date the influx of such "readily accessible, public record" information has been nil.

As for just asking the parties involved the amount of money that changed hands I have found that to be somewhat unreliable. Buyers tend to brag about how cheaply they purchased the car, and sellers tend to brag about what a killing they made on the sale, and the twain often don’t match!

Using asking prices results in numbers that are almost certainly higher than actual selling prices, because it seems that there is an unwritten rule that nobody pays asking price. But this overlooks the fact that the FML A.P.I. was never intended as a value guide. There are useful value guides out there, such as the Cars of Particular Interest Collectible Vehicle Value Guide and the N.A.D.A. Classic, Collectible, and Special Interest Car Appraisal Guide & Directory. Both of these have breakdowns by year and give low, average and high value ranges. This is much more useful than the FML’s one-price-fits-all number.

The FML A.P.I. was intended as a barometer showing where the market was headed, which is why figures from the past are also shown. That was important when it was first created because prices were changing rapidly. Maybe it’s a fallacy, but I believe as asking prices go so go selling prices. If the A.P.I. figure for your particular favorite model has gone up 20 percent in the past two years then there is a good chance that selling prices have likewise gone up 20 percent, and of course the opposite is true.

Keep in mind that A.P.I. figures are not a simple arithmetic average of the cars being advertised in that issue of the FML, a misconception which leads to regular criticism because a subscriber can’t duplicate the results. Prices are gathered from other sources, there is a time factor involved, and unrepresentative examples are not considered. Several years ago an astute subscriber accurately described it as "a lagging average over many issues that allows you to show trends, minimize issue-to-issue noise, and give an indication of the market even when no vehicles are listed." But it does come close to being an average or median. For example look at the 328 GTS 1986-1988 prices in this issue. Five of them are under the A.P.I. figure and six are higher.

But in addition to telling you where the market has been and, perhaps, where it is going, the A.P.I. can help you determine a value. If the example you are evaluating has an asking price higher than the A.P.I. figure perhaps there is a valid reason. Maybe it’s a late version in exceptional condition with low mileage and excellent records, making it more valuable. If it has an asking price lower than the A.P.I. find out why it’s so cheap. Maybe it has a mechanical problem or a checkered or undocumented history.

Just don’t expect the FML A.P.I. to tell you what an individual example is worth. Use it as just one tool to help you make that judgment for yourself.

So, it would make sense that, being based on advertised asking prices and not actual selling prices, the figures listed in FML's Asking Price Index would refect numbers that are higher than those based on actual sales, right? Again:

Using asking prices results in numbers that are almost certainly higher than actual selling prices, because it seems that there is an unwritten rule that nobody pays asking price.

So, why then are FML's numbers not only lower, but dramatically lower than those published in both Cavallino and Sports Car Market in the examples I provided? After all, if no one pays asking price, then certainly no one is paying over asking price.

The answer, I suppose, lies somewhere within that mystical formula that Gerald uses to calculate his figures. What I see happening is that models with asking prices that have remained flat or have appreciated very slowly, have listings in the API that make sense while cars that have been actively on the rise do not. Simply put, the FML's formula cannot keep up with market trends. If one were to review every single 275 GTB/4 that's been advertised for sale publicly over the past two years, I'm willing to bet that not a single one has had an asking price of under $350,000. The same can be said for Lussos listed for under $185,000. Where are these advertised cars?

It's also possible that Gerald's using only figures from cars offered for sale in North America, which might also contribute to the discrepency. In the case of the samples I've chosen above, the PF Coupe, Cab II, Lusso and 4-Cam, few have been offered on this side of the pond over the past year or so and the weak dollar makes asking prices in Europe much higher by conversion than they would have been only a couple of years back.

So, what to make of the FML's API? Personally, I think it does a decent job of reflecting asking prices for every model after the 275 GTB/4 (365 GT 2+2 and on), where the market has been more or less flat, but that the earlier cars are appreciating at a rate that the API's formula just can't keep up with.

So What's Up With the Daytona Market?

While, overall, the vintage Ferrari market has been creeping upwards over the past few years, several models in the 6-figure range have moved in leaps and bounds. I attribute much of this movement to what I call the "Push & Pull," where a particular car makes dramatic moves up or down in the marketplace (for whatever reason) and this movement, in turn, has an effect on other models within or near its price range. As most of you are aware, the Lusso (250 GT/L), long undervalued, has, in recent years, began to come into its own, doubling in value during that time. This has had a direct effect on models that were traditionally considered more valuable by "pushing" their values upward as well as on lesser valued models such as the PF Coupe and GTCs by "pulling" them along into the over-$100K club, which brings me to the question:

Why do Daytona coupe values appear to be unaffacted by this?

My answer? Because the Daytona is too far removed from the Lusso in terms of both style and substance and doesn't attract the same buyer. The PF Coupe is the direct ancestor to the GT/L and the GTC is the direct descendant. While the 275 berlinettas don't fall into this same blood line (actually being the direct ancestor of the Daytona), these cars share that 1960s appeal that attracts the Lusso buyer and have probably been pushed up as a result of the Lusso crowding their place in the market.

The 365 GTB/4 "Daytona" marked a major change in direction for the Pininfarina/Ferrari collaboration, yet that direction would soon change again with the introduction of the much more modern Berlinetta Boxer series, leaving the Daytona in a styling world of its own and, even though the 275 GTB/4 is it's direct ancestor, I think that 275 prices have little effect, if any, on those of its more plentiful (1284 Daytonas vs 330 275 GTB/4s) offspring. In fact, Daytona values seem to have almost as few ties to Berlinetta Boxer prices as they do the the 275 market.

So, to address the question I'm asked most, "When will Daytona coupes take off in the marketplace?", the answer is that I don't see that happening anytime soon. Sure, they'll continue a gradual climb along with the rest of the market, but I dont see them following Lussos up to anywhere near the $300K mark over the next couple of years.

Have I said otherwise in the past? Sure, but now that the Lusso dust has settled, things have become more clear (I changed my mind!). So, who's to say I won't change my mind again? Heh, heh. Remember, it's all just entertainment, baby!

Luxo-Cruisers: You Heard It Here First, Folks

From time to time I'll be posting my "hot picks," Ferraris that I feel are on the verge of a substantial increase in market value. The first two of these belong to a lineage of Ferraris that I call the luxo-cruisers, a line which extended from the 340 America of 1950 through the 365 California of 1966-67. My current hot picks are the 400 Superamerica and 500 Superfast.

Both of theses cars were the pinnacle of exclusivity in their day. In fact, they were so exclusive that they're about as rare today as the coveted 250 GTO. Take a look at these stats:

400 Superamerica
Number built: 47 (to include both coupes and cabriolets)
Power output: 340hp
Estimated top speed: approximately 175mph!

500 Superfast
Number built: 36
Power output: 360hp
Estimated top speed: approximately 175mph!

It's interesting to note that both the 400 Superamerica and 500 Superfast have better power-to-weight ratios than the later 365 GTB/4 Daytona!

So why are these two on my hot picks list? Because both are extremely rare, have attractive coachwork and are comfortable and highly useable, especially in comparison to their contemporaries, the 250 GT/L and 275 GTB and, in spite of this, their market values have remained flat for far too long.

Using Cavallino magazine's price guide for comparison, we see that the 400SA has enjoyed a normal, slow appreciation over the past couple of years while the 500SF has remained almost entirely flat during that same period.

400 Superamerica
December 2002: $275,000 - $500,000
December 2003: $290,000 - $500,000
December 2004: $350,000 - $450,000

500 Superfast:
December 2002: $270,000 - $375,000
December 2003: $280,000 - $400,000
December 2004: $270,000 - $400,000

Now look at what's happened to other models from the same era:

250 GT/L
December 2002: $115,000 - $200,000
December 2003: $130,000 - $260,000
December 2004: $240,000 - $350,000

275 GTB (long-nose, 2-cam)
December 2002: $200,000 - $250,000
December 2003: $200,000 - $265,000
December 2004: $375,000 - $475,000

With Lusso and 275 prices pushing their way up into SA and SF territory, the much more exclusive luxu-cruisers are due for a serious increase in value. Just remember, you heard it here first!