How Much do Ferrari Dealers Make?

Ed,
As someone who tried to buy an F dealership, I can tell you that the numbers are very closely guarded. It was only fairly deep in the negotiation that I was able to look at the books and tax returns. It is not something that the dealers divulge and they are not numbers that many people know, no matter how much they think they might know.

 

And of course, I signed an NDA so I can't help you.

 

I have no data on what individuals dealers make. However, the sales for most companies, including Ferrari, is widely available; although widely scattered. Ferrari is small potatoes compared to the others you list (except for possibly Lamborghini).

The euro has changed significantly during the course of 2003; right now it's about $1.20US, but in 2003, it was only $0.80 to $0.90 US. So I left everything in euros.

Ferrari (Division of FIAT Spa)
(in millions of euros) -2002
http://www.fiatgroup.com/eng/finanza/uk20021.pdf
Net revenues 1,208
Operating result 70
Capital expenditures 176
Research and development 94
Net invested capital 142
Number of employees 2,896


Mercedes-Benz (Division of Daimler-Chrysler AG)
(in millions of euros) - 2000
http://www.autointell.net/nao_companies/daimlerchrysler/dc-business-figures/merc-pass-car-sales-01.htm
Net revenues from car sales - 38000

BMW (in millions of euros) - 2002
http://biz.yahoo.com/ic/41/41758.html
Revenue: 44316

Porsche (Division of VW AG) (in millions of euros) - 2002
http://www.autointell.com/sports_cars/porsche/porsche.htm
Revenue - 4860

Lamborghini (Division of Audi Group, a division of VW AG)
Data is buried so deeply in this labyrinthine company that I could not find anything on Lamborghinis.

 

aren't those numbers totally indecipherable?

i mean, 1.2B E is nice, but they've got all the F1 hundreds of millions stuffed in there plus any other racing efforts and whatnot. so the marlboro payments, schumi's salary, etc. etc. etc.

i think knowing italy's GDP is probably as useful a piece of data to derive what a NA F dealer generates per year in revenue

doody.

 

As important as what profit they will eventually generate, what location did you have in mind that will keep you from going under that will generate sales and keep you in the black? Once you figure out the profit margins and you have the location, Ferrari probably ranks its dealerships like the dealerships/FNA do the customers. How long do you fight it out at the bottom of the pile trying to score the right cars? Thats what I think of anyway. On the up side, being successful at it has its own rewards, though it might be too much of a good thing and spoil your appetite for the marque. You can always sell out at that point

 

I have thought that porsche is still independent even though sharing with VW. Your line calls it part of the vw group but the linked page calls it independent. Any clarification?
T

 

To begin with, I'm just guessing here. One of the occupational hazards of being a CPA is that I'm always guessing about what a business nets. If I walk into a resturant during peak hours, I can usually guess the net within 10%. Every business is different, but there are certain truths that hold just about everywhere.

The first truth is that most bidnesses net far less than what most people think. (I'm leaving the dot.bombs out of this because they never made any money anyway.) You'd be amazed how many people think that most bidnesses net 50% of gross. I wish. The truth is that most businesses net somewhere between 4 to 12 percent after taxes.

To illustrate, almost 5 years ago, I almost opened a BMW motorcycle shop. Using BMW's numbers, I stood to net about $100K a year, based on a gross of $1.5M. Provided, of course, that I worked as the GM, the sales manager, errand runner, and best boy.

Here's how the numbers worked. Gross profit on a $18K motorcycle was about $1,500 (on a good day). Sell about 60 bikes a year, and you had enough money to pay a sales man and do some marketing. The only cool thing here is that if you flip enough units, profits from sales is free money because you never hit the floor plan bill.

Your margin on service was roughly 50%. If a tech bills out at $70 a hour, the dealer gets $35. There are 2080 hours in the standard work year. If you keep each tech busy for say 1800 hours, the dealer makes $63,000 per tech. Keep 2 to 3 techs busy all year, and you have enough money to pay the light bill and the rent.

Parts and accessories are the gravy. Generally, you figure parts at 1 to 2 times service revenue in dollars. Gross margins are generally 35% to 50%. P&A are like beans. The more beans you eat, the more you poot, and the more you poot, the better you feel. Your profit comes from this pie.

So if you want to run the numbers for a Ferrari dealership, just scale up the numbers. I have been told, for example, that the dealer margin is 10%. Sell one Enzo, the dealer gets $60K. Ferrari techs go out the door at $100 an hour. You do the math. I don't know this, but I'm guessing that dealers don't make that much relatively speaking on parts.

When you add all this up and include the fact that Ferrari dealers are typically located in high rent areas, my guess is that most dealers make in the low to mid 6 figure range from operations. Indeed, my guess is that typical new Ferrari customer makes more than the dealer he is buying the car from.

The good news, compared to other new car dealers, is no debt. I don't know about Masers, but I have been told that Ferrari doesn't offer floor planning because, well, with a 2-year wait list, you don't need any floor plan financing. (This also explains why your Ferrari dealer is not a good place to trade in a car. Without floor plan money, they have to quickly dump your trade.)

But the really great news for a Ferrari dealer is "Blue," i.e., blue sky. Ferrari dealerships are like land, they ain't making no mo. (Or not many anyway.) Thus, new guys have to pay to play. From what I have heard, the going rate for Ferrari Blue is roughly $6 to $7 million (maybe we should call this Rosso Red, instead of Blue?). Note that this is just the Blue payment. If the dealer owns the land, you are gonna pay more. If the dealer owns subtantial parts or vintage inventory, you are gonna pay even more.

To put this in context, say you have $7 million just buring a hole in your pocket. If so, you have probably hired someone like Mr. Glickenhaus who is currently ginning up say a 5% return on this money. For those of you still following this post, this works out to $350,000 a year in pre-tax dollars.

To convince your spouse that blowing $7 million on a Ferrari dealership is a good idea, you're probably going to need to show her that you will make, drum roll here, at least $350,000 a year. Good luck because odds are you don't have a clue as to how to run a car dealership, much less a Ferrari dealership.

Even if you get through all of this, you have to find a dealer who is willing to sell. If this was 1993, you probably could have taken your pick. In 2003, though, this is a different story. Think about it. Why would a dealer who has made it this far be willing to sell? There is nothing but blue skies ahead.

My advice? Take your $350,000 a year and go Challenge racing. You'll have a lot more fun, get to rub elbows with the high and mightly, and run on some of the same courses as the F1 drivers. Even better, you'll still have your $7 million.

Just my 2 cents and some change.

DrTax

ps I'm willing to bet that most of the older Ferrari dealers were not rich to begin with. Indeed, I doubt that many of them are as rich as you might think even now.

 

Dale - awesome explanation.

 

It does not mean you make a dime. Great example is Ferrari of Los Gatos. Anybody know THAT story? My guess some operate at a loss. But if the owner has the jack, and it opens a social world we may never see, who cares?


In addition, remember it's cyclicle. Look at Harley Davidson. 25 years ago, the Harley dealer in our area was a small dumpy house with a couple speed freaks working in the back. One bike on display. Now it is a shishi esspresso sippin place that doctors and MBA's hang out at. Thankfully, Pomona Valley Harley Davidson does have one guy in service named "Spider", perhaps for effect.

But the sheen comes off. Next it's Ducatis and MV Agusta getting hot. I want what you ain't got. Will that happen to Ferrari? There were not always waiting lists.

It's a tough road. I imagine..in fact I think I have a sense...that allocation may be at the whim of FNA...and not as fair as dealers like. I appreciate their work. And have met some wonderful folks that work there.

Like my business. I have been lucky...but most guys that own high end audio stores buy themselves an OK paying job with long hours. Or less.

 

I worked at Ogner when they were selling to Auto Gallery. Here are the rumored numbers that flew around the sales floor - probably close to legit because the owner's son, a real sh!tbird, was a salesman, and I suspect a lot of the info was leaked by him.

The store capital ALONE, including the facilities and land, without the signage or franchise fee, was $15million. The franchise was around $10million, and the signage was about $3million. Keep in mind that Ferrari would only allow the transfer of the franchise if Auto Gallery dumped a hude amount of cash into renovations.

We all estimated that the sale of the store, w/inventory and capital, amounted to around $30mil.

Now, as for income, the SKY IS THE LIMIT!

We sold brand new 360 Spiders for $200k over sticker, 550's for $50k over, and while I was there, two Barchettas went for well over $400k. I had an offer turned down by Old Man Ogner for $400k + tax for one of the Barchettas.

All used F-cars grossed about $10k/car, which probably amounted to a net of maybe $4k/car. We sold about 3 new and 6 used F-cars a month, and I would assume that the dealer made *at least* $60k NET each month on sales alone.

These are all estimates, BTW.

 

Dale, I got your email and I replied to it.

 

I don't think so. I think it's more like 15% + Shoot if Porsche is 14% with the holdback, Ferrari and Lamborghini have to be 15%+. Considering they sell every car at list or over, low-ball trades/used Ferraris, force you to trade your old F-car to get your new F-car, charge whatever ridiculous amount they want on service and parts because there's little competition, no wonder why they keep their profits a secret!!

 

I don't know what a Ferrari dealer makes, but Shelton in Fort Laud. is buying up the entire block of prime land. I hope they do something fun with all that room.


If you think about getting into the business....
You don't get rich doing the HOT thing, after its already HOT.
Lambo Dealer is the wild risk, with the company making a new stab for the exotic car market.... you could get lucky?

 

BTW, I want to make it clear that I have never seen the books of any Ferrari dealership, nor do I ever expect to. All the numbers in my post are SWAGs based on non-Ferrari and motorcycle dealerships.

My main point is that I suspect that most dealerships (at least those who play by the rules) don't make as much as you might think.

I guessing, though, that Ferrari dealerships are becoming like sports franchises. You know, the greater fool theory. Yeah, spending one billion for a NFL franchise (you wait, it will happen) doesn't make sense based on the operating numbers. But, you gotta believe that there is a greater fool out there just waiting to spend two billion.

In other words, someone who has the stoke to spend $8M on a 250 GTO, probably wouldn't blink at spending $18m on a Ferrari dealership.

For the rest of us, I recommend just buying the cars and having fun. Why ruin a pretty good obsession?

Say good nite, Gracie...

 

Quoting Sherpa23 - "" What makes you think that Ferrari of Los Gatos was losing money? ""

I don't know. But had a friend that got boinked hard on that deal. And could recover nothing. I would love to hear true details on it if you have them.

There are certainly occassions that principles will take money from the company coffers...but to do so to the point of running a profitable business OUT of business mystifies me.

 

Dr Tax - As a fellow CPA, I enjoyed your explanation.

 

Some dealers do make more than others - especially overseas.

I can get a new 360 Coupe from the UK for circa NZ$300,000 landed in NZ. Buy one in NZ and it will cost the best part of NZ$390,000. $90k difference. We get our cars through Australia and someone, somewhere is taking a big piece of the pie.

Regards
Andrew in NZ

 

I wondered about that too, as RHD car values are all over the place but I think with the pound to the NZ swinging between 3.6 and 2.7ish they maybe have to lean towards caution (ie your pocket) so that in that time between when the car is ordered and delivered they don't loose. And maybe a little supply and demand, CCS have a truckload of 550s and few 360s available new or second hand.

And Dr Tax, enjoyed your explaination.

 

Aventino- are you in NZ?

I have heard that CCS are not too worried as they sell all allocated cars anyway......demand for 360s exceeds supply. Yes, there are quite a few 550s going at present

 

fwiw, my understanding is that the margin is closer to 15%. this from an ex-f-car-salesman.

still, the buy-in is prohibitive. better to scour for new territory than buy existing (if you really have a number of screws loose and still want to do this!).

i heard all sorts of juicy stories re: FoLG being a vehicle for laundering substantial amounts of drug money internationally ........

doody.

 

Hmmm... not thinking about writing a mystery novel are you, Mr. Doody to you?

Actually, 15% is probably a better number, but so what? It might sound great to make $90K on an Enzo, but what if you don't get allocated an Enzo, as I understand has happened to some dealers?

Even worse, it my understanding that many Ferrari dealers had to take way more Masers than they really wanted. While the Maser cars supposedly had good markups, next time you are at at a dealership take a look around. My guess is that you will see more Masers sitting on the floor than anything else. As Rosana Rosanadana used to say, "Dere's aways sumthing."

BTW, have you put skies on the front of your Maranello yet? What's with all this snowing stuff?

DrTax

 

Good Post.
The ROI of an F car dealer is about 6-8%. ( This is a real # not a guess) If interest rates go up, that will go down as having 456's and 02 Maser Spyders on your floor plan for 200 days is no fun.
An F car dealership is not IMHO an investment unless you started it years ago for very little and sell it to someone who has to have it at a 6-8% ROI.

 

There's a reason that everyone appreciates Mr. G's posts.