Throughout many threads on this forum and around the internet there is a constant assumption that Ferrari's (non V-12's) have very little depreciation. That is absolutely false. The problem is how people calculate the initial price of a 360 or 430.

The market price of a new Ferrari 430 is over $250K just like the 360 initially. However, if you have an "in" with a dealership you can buy one for $180K. But, the big misunderstanding is that once you drive the car off the lot it actually cost you the true market price of $250K+ because that is the opportunity cost of not selling it. Essentially your connection at the dealership is worth $80K because you can sell it for that much profit. But that has little to do with the car. Today a low mileage 2000 360 is worth say about $120K. Considering that to purchase the car new in 2000 (or if you bought it at sticker you could have sold it immediately for $250K) cost $250K. So the real depreciation is over 50%. People that buy the car for sticker price never seem to consider the opportunity cost of not selling the car immediately. You already earned the markup by having a connection at a dealership. As the model run streches into it's later years the initial markup comes down but so does the speed at which the car drops below sticker. A 2003 360 probably had a market price of about $20K over sticker but is now worth about $40K below sticker so it's actually lost $60K in depreciation.

When figuring depreciation for any car you have to subtract the price you sell at from the price it would have cost to purchase new (or the price you could have sold it for new if there is a markup).

Later model Ferrari's are just like any later car model. For instance a board member mentioned the fact that his 348 hasn't lost value. Well if someone does a search for just the right 993TT at the right price, you may be able to hold it for a while with little depreciation.

Sorry for the long rant I just get frustrated that people don't seperate a car's real depreciation from the value of their connection at a dealership. It's like having a stock option with a strike price below the current market price because of some relationship you have with a company. The option has it's own value (market price minus strike price) but once it is exercised a new analysis must be made as to the future value of that security.

 

Very good analyis.

 

IMO any dealer charges over sticker is BS and should be considered as criminal. the depreciation is also BS because the trade in value is always much lower than the current market value unless u find the right private buyer. so since everything is BS so the bottom line is people who drives expensive cars should know the out come and stop doing the pointless comparsion.

it will be much easier for a car maker (this apply to everything else. i.e V1, Scion) that sets one price. no one gets deal no one gets mark up. people then no need to be worry about be screwed or get a smoking deal. it will also help to stabilize the used car market.

this idea is pointless because it's never gonna happen. please forgive me for wasting ur valuable time reading this post.

 

I always thought Ferrari dealers weren't allowed to sell above sticker. I should go back to one and find out for myself. I went once and they pissed me off beyone my wildest dreams, so I left.

 

Also, remember mileage for mileage a Ferrari actually depreciates faster.

 

Exactly why Saturn is (relatively) successful yet makes real crappy cars ...

 

My only comment to your very clear analysis is the assumption that the dealer who sells at sticker is giving up some premium that is transferred to the buyer with an "in". Ferrari dealers, like any other profit maximizing enterprise, do not forego any part of the market value of their cars; why would they do that? The premium may be harder to see, hidden in other transactions, etc. but it is there in one form or another.

 

Very few Ferrari owners actually drive their Ferraris, many Porsche owners drive their Porsches, driving the car and enjoying it is worth the depreciation no matter what it is, buying a new car today as an investment isnt a bright idea, drive and enjoy.

 

BE RIGHT BACK... GONNA GO DRIVE IT AROUND B4 I TALK AGAIN!

 

Solution for nonferrari owners: Raise msrp by 70k.
Solution for people who own ferraris: keep msrp low, and make it seem like it's a relatively good investment.

 

[QUOTE]Originally posted by carnut
The market price of a new Ferrari 430 is over $250K just like the 360 initially. However, if you have an "in" with a dealership you can buy one for $180K. But, the big misunderstanding is that once you drive the car off the lot it actually cost you the true market price of $250K+ because that is the opportunity cost of not selling it.

Your first error here is that you are comparing the beginning of the producton run with the Ferrari's where they were hitting $250k. Why not look at real world examples today, or for the last few years, of a 360? When the 996TT first came out it was going for well over retail as well, remember that? The same year 360 today still sells for WELL over the same year 996TT today.

In any event, there isn't any magic to the people that have an "in", most can get their name put on at the Ferrari dealer, they just have to wait their turn. And, every single 360 that sells through an official Ferrari dealer DOES sell at retail price, it is only the car "flippers" that sell them for above retail.

Lets take a case in point. In the past 2-3 years the 360 Modena has had a market value of about $20k over retail when sold new. New sticker on a 360M in 2002 was $155k. A 2002 today can sell for $140k. Even taking into account the "opportunity lost" value of $175k, we are talking a $35k loss. A 2002 996TT sells for what new and for what used today? I know my 2001 996TT stickered for $140k when I got it, but they were going for $35k over sticker when I bought mine. Today it is worth about $75k at most. I lost $100k on it. Using this example how do you figure the Porsche didn't lose as much as my Ferrari?

So, lets looks at the GT2 and 360 Challenge Stradale. I won't even bother going through the numbers, but you will have to perfrom some magic to convince anybody the Ferrari depreciates as fast as the Porsche in this example.

 

Lexpro-
You are right, Ferrari dealerships are profit maximizing. However, they are restricted to selling cars at MSRP. So the real question is why does Ferrari itself establish a MSRP below the market price or artificially limit production to cause such a gap. Well my theory is that they artificially produce less than demand in order to build and maintain the brand equity. By having strong brand equity they obviously expect more money in the long term. For example new Gallardo's are being discounted $30K and many are sitting unsold. People want what they can't have. If, for a short period of time, Ferrari produced enough cars to meet all the demand - the used car market would soon be flooded, the demand would shrink as it would no longer be so rare and eventually Ferrari would be producing about the same or even less than they do now and still have to discount to compete with the used market. Remember that if new cars are available easily at MSRP then that affects the value of used cars which in turn affect the demand for new cars. Additionally, current Ferrari owners generally tend to always keep at least one Ferrari in order to maintain relations with their dealership. So Ferrari is not altruistically giving away money to customers. Instead they have devised a strategy that increases the profit pie but for it to work they must transfer some of that extra profit to customers.

 

Michael

You can compare the cars at the beginning or end of the production run and they are similar. Beginning of run 1999-2000 360 sold for $250K ($275-300 in some silly instances), today the same car sells for about $100-120K. Hence loss of $130-$150K or about 50-60%. 2001 Turbos sold for $160-175K today about $65-$80K. Loss of $90-$100K (Cars that initially sold at the higher part of the range were loaded and are selling to day at the higher part of the range and vice versa) or 50-60%.

Sure, I never said there was any magic to it. Some people "earn" the premium by waiting in line and others because the dealers always push them to the front of the list.

A 2002 360 would have cost you about $180K new minimum atmarket price (probably closer to $190K). A $155K 360 is a base car and today in the used market would probably bring in closer to $130K hence a loss of $50K. The first few 2002 Turbo's sold for sticker or slightly above in some markets because it was the beginning of the 2nd year of the car. 2002 was the 4th year for the 360. So comparing apples to apples I would compare a late 2002 early 2003 Turbo that by then was available $10K below sticker so about $120K (remember I'm talking real depreciation so I count the market price). Today that car would be worth about $80K. Similar (actually less) than the 360.

No magic necessary. GT2's only commanded a premium before they were released. By the time they arrived, you could buy one for invoice (soon thereafter you could buy one behind invoice). Today it's worth about $130K so about a $30-40K drop. Compare that to the real MARKET price of the CS from the time it arrived until today and you again have similar numbers (actually GT2 ends up with less depreciation).

 

Are u guys trying to prove the model of Supply and Demand and it's affect on Price?

Don't. It's been done. Go signup for ECON 101 at a junior college if you want to learn more.

 

Thanks Collin-
I think we have a pretty good grasp on the concept, just using it to describe depreciation.