Interest rate hikes vs. Ferrari values???

Discussion in 'Ferrari Discussion (not model specific)' started by ILuv4Res, Jul 6, 2004.

  1. ILuv4Res

    ILuv4Res F1 Veteran
    Lifetime Rossa Owner

    Aug 8, 2002
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    Although there has been a lot of debate on this site regarding paying cash vs. financing a F-car, I have a slightly different question/discussion item.

    Since it seems like interest rates are on the way up, will that translate to lower values to existing 'used cars'?

    It seems there are many people who are simply payment driven to buy things. F-cars should be no exception to that. Therefore, as rates rise and, in turn, cause the payments to rise, will that lower overall sales prices/values?
  2. henryr

    henryr F1 World Champ
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    Nov 10, 2003
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    Juan Sánchez Villa-L
    doubt it unless your in the "pozer" class. better question is, what is it going to do to your home value.....
  3. scycle2020

    scycle2020 F1 Rookie

    Jan 26, 2004
    unless interest rates jump up many percentage points, the general economic state of the this and the world economy is more the market tanks significantly, this will effect used f car prices..btw, if kerry wins and is able to raise taxes like he wants, it will effect the more affuent american who tend to own and buy f cars.. this could also depress f car prices, not to mention the economy in general
  4. Aureus

    Aureus Formula 3

    I can see the bumper sticker now

    "A Vote for Kerry is a Vote for cheaper Ferraris!"
  5. mustgofaster

    mustgofaster Karting

    Mar 27, 2004
    West Lakeland, MN
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    The general casue of interest rates going up is due to incomes increasing and manufactured goods being consumed. Simple translation = more buyers able to purchase a purty Ferrari. You will lose a very small percentage of potential buyers due to higher interest rates.
    just this bastad's .02
  6. steve f

    steve f F1 World Champ

    Mar 15, 2004
    12cylinder town
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    intrest rates are to low at the moment get them up to 15 percent then it will sort the men from boys
  7. ILuv4Res

    ILuv4Res F1 Veteran
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    Aug 8, 2002
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    Sure, but wont the higher interest rates cause some people to cut back on things. Wouldn't non essential transportation and/or toys be the first to go?
  8. tifosi

    tifosi F1 Veteran
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    Sep 5, 2001
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    Tom D
    its very hard to make broad statements on consumer behavior especially as it relates to "high end" items. Rates going up is not always a bad thing, it can mean the economy is growing and there is less need for monetary stimulus. It can also mean inflation in which prices (of most things)are rising to fast due to strong demand. Higher rates also mean more income for people who invest in fixed income assets.
  9. Cavallino Motors

    Cavallino Motors F1 World Champ
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    May 31, 2001
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    Martin W.
    The reason the Ferrari market has been strong this season is simple:

    Those that have 5c of brain realize that the real estate market is fueled by people that have no clue what they are doing.
    Most average Joes borrow money against the increased equity in their homes to make downpayments for other real estate that is higher than the return such property produces. They invest on appreciation not return on investment. Most take the tempting low interest adjustable rates and now that the rates are going up their holding on to property becomes more and more choking on their budget. So people sell and that quick which triggers a overage of available property and therefore decreases prices, which makes those that are not yet choking worried and put their property also on the market and now there is much more and prices will come down even more.

    If you have the 5c of brain you see the writing on the wall and liquidate your real estate holdings right now. Since there is nothing else to invest in you may as well buy the toy that you have deprived yourself off during the stock market boom and the subsequent real estate boom. Since it will take one to two years for the RE market to self correct you may as well buy that Ferrari you always wanted but never wanted to put the money out of the market to buy your dream car.

    There is your interest rate vs Ferrari.
  10. tonyh

    tonyh F1 World Champ
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    Dec 23, 2002
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    Tony H
    Fair point; I don't know what property prices have been like in US lately, but here in the UK they have rocketed and consequently people "feel" much wealthier. Unless and until they start to feel the pinch through higher outgoings , they will hang on in there.
    Also, i can't see many Ferrari owners not having the means to finance their purchase. Sure , a small minority may be living the dream on the strap, but generally most owners will have repayments covered.
  11. Smiles

    Smiles Moderator
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    Nov 20, 2003
    Pittsburgh, PA
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    Matt F
    The interest rate is still quite low, especially compared with the past 25 years. I don't think it's going to have much impact at all on Ferrari prices.

  12. MILotus

    MILotus Karting

    May 20, 2004
    Lansing, Michigan
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    Funny.... I did that yesterday :) New garage on the main house and a new car in the garage!
  13. Spasso

    Spasso F1 World Champ
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    Feb 16, 2003
    Land of Slugs & Moss
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    Han Solo
    Me too, bought the 308 a year and a half ago and built a new garage this spring.
  14. ILuv4Res

    ILuv4Res F1 Veteran
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    Aug 8, 2002
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    That is a good segway into the 'net worth in F-car' thread! :)

    By the way, I love the responses. It is definitely not what I expected. It seems the majority of you feel interest rate hikes will have no or nill effects on the F-car market.
  15. Ken

    Ken F1 World Champ

    Oct 19, 2001
    Arlington Heights IL
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    Well, some people DO know what they're doing in real estate, but that not withstanding you make valid points. Another, more important issue in inflation is that in inflationary times, you don't want cash. Real estate is a GREAT hedge against inflation if you have significant equity in it (i.e. aren't going broke paying loans). Other things that do well in inflationary times is collectables like rare coins and FERRARIS!!!!

    Remember the exotic car bubble that burst in the late 80's? We entered a period of low inflation then, and the best investments were in the stock market. Proporty values stagnated, while collectables like coins, rare stamps, cars, etc. plummeted. We had 8 years of prosparity under Clinton and cash was king.

    Now we have the spectre of inflation raising it's head again. The last 4 years have been boom years for housing due to low interest rates, and even with rates going up housing will remain strong but not the almost 2 mil starts we have now. I see 1.6 to 1.8 which is still not bad. Ferraris and rare coins will once again go up in price. Especially if Bush gets relected, we will see significant inflation, unemployment, and 308 Ferraris selling for $50k

  16. Ledfoot

    Ledfoot Rookie

    Jun 6, 2004
    Cars are a commodity, period. Jack interest rates up high enough, and the price of the commodity will come down. Ferraris are no different. The 2000-2004 period is a recent example.

    With that said, today, money is quite cheap, so cheap that I bought my car last spring for cash at dealer invoice...( a 2003 z06 Corvette )...contrast this with the fact that I paid MSRP for a 2000 coupe in the spring of 2000.

    In 2000, interest rates were high
    In 2003, interest rates were low

    In other words, the price of the commodity still comes down to supply vs. demand. If enough people want something that is in limited supply, the price will rise...and vice versa.

    In the future, If you ever see U.S. Government bonds yielding 6% more than the s&p 500, do not buy a Ferrari, buy the bonds and wait for the commodity market to correct.
  17. racerdj

    racerdj F1 Veteran
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    Jan 19, 2003
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    I think a better question will be what will the interest rates do to the small business climate.
  18. Texas Forever

    Texas Forever Four Time F1 World Champ
    Rossa Subscribed

    Apr 28, 2003
    Wow Martin, I betthat you better half doesn't use that line as a closing pitch! :)

    Truth is that I'm very happy that interest rates have ticked up. Two to three years ago, the Fed was losing sleep over the real price deflation, i.e., the price of real goods such as real estate falling. You see, when real estate prices drop, the loan to value ratio goes up putting the property into default. When you have enough of these bad loans, the bank goes upside down on its equity. The next result is the S&L crisis we had in the 80s. Truth me, you don't want to go there.

    The Fed's problem was that it had already dropped interest rates to 1% but the deflation bear was still out of its cave. The Fed was just about out of ammo and the bear was still loose.

    But now that Chairman Greeny has discovered the "I" word again. Life is good. The bear is hibernating. Flowers are blooming. Birds are singing. With any kind of luck, we'll get a Bush/McCain ticket.

    Plus, the Euros are sick, sick, sick. The Euro is way overvalued. The Pound less so. Sooner or later, we will get back to the Rubin strong dollar days and our Euro friends will make mucho money selling things to the rich Americans.

    Just remember. It is always darkest before the dawn. We have nothing to fear, but feat itself. Oh, wait. WTF is that! ARRRRRGGGG!!! (Just kidding.)

  19. Zinhead

    Zinhead Karting

    Feb 29, 2004
    Chicago, USA
    This is one of the dumbest things I have ever read.

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