|
 The
following article first appeared
on my Mercato Ferrari web log as a
two-part piece published on February
17 and 26 of this year. Since that time,
the issue of market guide confusion has continued to pop up with regularity both on FerrariChat and in outside
discussions, making it painfully obvious exactly how small the Mercato
Ferrari audience really was. Once
again, here is the entire piece in its
original form followed by comments
and updated information.
PART ONE:
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, Bonham’s, 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 re-
cords? I
have privately invited individuals interested in reforming our price index
to approach their local govern-
ment 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 reflect 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 discrepancy. 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.
PART TWO:
In Part I of this piece, I addressed the concerns of the
market-curious who find the discrepancies 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 dealing 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 arithmetic 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.
_______________________________________________________________________________________________________
When
Part I of this piece first appeared on Mercato Ferrari, it drew an
unusually hostile response from the
publisher of the Ferrari Market Letter, who took my analysis of
the situation as some sort of attack on
his
publication. It was nothing of the sort. The fact is that there exists
a large discrepancy between the figures
reflected in his Asking Price Index and some popular value guides when it
comes to several of the older models
that have been on the move over the past couple of years. His
explanation that this is due to the fact that the API
is not a "value guide" and uses asking
prices as opposed to actual selling prices does not hold up, seeing as his
figures are lower than those presented in
the other two publications that I used as examples. My intent was not
to
deride him for this, only to explain the
discrepancy to my readers, many of which had expressed confusion
over the
situation.
Whether the result of an adjustment in his formula or, more
likely, a case of FML’s methods catching up to a
slowing market, a look at the values given for these same Ferraris three
months later
reflects considerable closing
of the
market guide gap:
250
PF Cabriolet series II
Cavallino (Guida
Apr/May 05):
$225,000 -
$350,000
Sports Car Market (Price
Guide
2005):
$175,000 - $300,000
Ferrari Market Letter (Asking
Price Index
May 21, 05):
$192,289
250 PF Coupe
Cavallino (Guida
Apr/May 05):
$65,000 - $125,000
Sports Car Market (Price
Guide
2005):
$75,000 - $125,000
Ferrari Market Letter (Asking
Price Index
May 21, 05):
$71,538
250
GT/L
Cavallino (Guida
Apr/May 05):
$250,000 - $370,000
Sports Car Market (Price
Guide
2005):
$250,000 - $350,000
Ferrari Market Letter (Asking
Price Index
May 21, 05):
$276,732
275
GTB/4
Cavallino (Guida
Apr/May 05):
$450,000 - $495,000
Sports Car Market (Price
Guide
2005):
$425,000 - $500,000
Ferrari Market Letter (Asking
Price Index
May 21, 05):
$474,455
It's plain to see that, due to the
methods used, the slow-to-react Asking Price Index does not
accurately reflect
current asking prices of Ferrari models
during periods of evident and dramatic market activity, a fact that has
been the cause of much confusion. Hopefully, by helping some of you to
better understand the process behind
the numbers, we've eliminated that confusion and made it easier to take it
all in and arrive at your own
conclusion when trying to determine a particular car's value.
_______________________________________________________________________________________________________
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