COVID-19’s Impact On The Used Ferrari And Exotic Market
Adam Merlin June 2020
Many people are wondering what kind of impact COVID-19 will have on the used Ferrari and exotic car market. While none of us know for sure, history will tell us that we can certainly expect some volatility in values and the possibility of some great deals hitting the market. We believe this to especially be true in the late- model, more mass-produced exotics like McLaren, Lamborghini and even certain model Ferraris, such as the California, Portofino, FF, etc. People who stretched to buy these cars when times were great, could potentially be suffering now, and the huge car payment, upcoming service bills, and insurance obligations might result in some cashing out with a focus on quickly, as opposed to maximizing exit price.
That said, history also tells us that top examples of collector cars always seem to fetch top dollar, and we believe this will be the case today as well. If you are buying a pre-owned Ferrari with the investment in mind, you need to think long term. Unlike late-model exotics, the older and more collectible cars, have values that tend to be more stable so the value fluctuation is usually much less. No doubt there will be some collectors who panic and that will create a few examples of top quality cars being sold for bargains, but it’s doubtful that there will be a mass liquidation resulting in any meaningful value reduction.
Our philosophy when it comes to collecting a Ferrari or other collectible exotic is simply “the longer you keep it, the more money you stand to make.” Take Warren Buffet as your example, operate with a buy and hold strategy. Watch for great deals and great cars being on sale and do not panic when you have invested in good cars.
Another aspect to consider is what you can do with your Ferraris as you are holding them. Did you know that you can use collectible automobiles as collateral for loans? We all know that auto loans exist, but did you also know you can pledge your exotic car collection as collateral on longer-term loans or revolving credit lines that you can use for other purposes? Sometimes we all would like a little more cash in the bank or some available funds to invest whether it be in securities, real estate, our businesses, or anything else. Some people are lucky enough to walk into their garage and see $1 million-plus worth in their exotic collection sitting there, but wouldn’t it be nice to have those cars and access to the cash to invest in other areas to generate returns. There are several niche products in the market that will allow you to pledge cars as collateral and have operating lines of credit and lump sum cash payments that you will be able to use as needed.
With the state of the economy today and all that’s going on with COVID-19, this is definitely something to consider when analyzing your financial situation and trying to determine how to plan for the unknown. This could also be a great alternative to dumping a car you never intended to dump and ultimately giving you the best of both worlds.