Cigar Aficionado

The dreamer, a teenage recidivist, was just fulfilling a lifelong dream. He had enjoyed a good year financially in 1984, and 1985 was looking even better. Tom Blanchard, we'll call him, was 42 at the time, and he had been an automotive enthusiast since he read his first Road & Track. He always had something interesting in his garage, but he had never owned every enthusiast's dream: a Ferrari. Red, of course, with a 12-cylinder engine. So, with one good year in the bank and the promise of more of the same, our dreamer sets out on his quest.

The search takes awhile. There isn't a Ferrari store in every town. But Tom finally finds his dream car: a 1966 275 GTB 4, in good shape, for $75,000. Driving it home he revels in the rich leather, the array of gauges, the awsome power of that V-12. Ferrari street cars are direct descendants, sometimes first cousins, of Ferrari race cars, and the GTB 4 in Tom's hands is a prime example. The 3.3-liter engine produces 300 horsepower at 8,000 rpm, the suspension is firm--most American drivers would call it stiff--and the car's cornering is flat, solid and sure-footed.

When Tom drops the thin, upright shift lever into a lower gear and gives the V-12 full throttle, the car leaps forward, and the noise level increases in tandem with the tachometer needle's climb. He feels the G-forces at work on his backside as he slices around a tight right. This, Tom says to himself, is what owning a Ferrari is all about, unaware that he's going to learn that owning a Ferrari means more than driving pleasure. Tom has bought a seat on the big, red roller coaster.

In 1984, used Ferraris were generally bought and sold by and to enthusiasts--men, primarily--who enjoyed the cars built by the famous Enzo "the Commendatóre" Ferrari, for their history, their beauty and the thrill of driving the acknowledged thoroughbred of the automobile world. When Ferraris changed hands, the seller usually made some money, which meant that older Ferraris were gradually appreciating, but no one was frantically buying and selling. It was, above all, a gentleman's pastime.

But about the time Tom parked his prize for the first time, something happened. Some unrelated forces dramatically changed the Ferrari scene. An automotive feeding frenzy was about to begin. In early 1985, when Tom bought his car, he drove it occasionally, washed it regularly, enjoyed it thoroughly and certainly had no thoughts about selling it. However, by mid-1986, he noticed similar cars being d for $150,000 in the buff books. He started paying attention. By the middle of the next year, GTB 4's were bringing $300,000. Tom didn't take his out into traffic as often as he used to. When, in 1988, GTB 4's were selling for $600,000, his stayed in the garage, under its car cover. When a GTB 4 sold for $1,250,000 in 1989, Tom began planning his early retirement. It seemed the craziness would never end.

But it did. And quickly. If we have Tom selling his car in 1989, we leave him a happy man. If, on the other hand, he kept it in the hope of making more, he saw the value of his car plummet from that $1.25 mil high to maybe $300,000, more likely $275,000 today. Still, if he could have found a buyer, he would have made a handsome profit. The "loss" was on paper. But what about the last guy on the ladder? The one who paid $1.25 mil? That's a serious ouch.

If you've always wanted a classic Ferrari, the experts agree that it is a good time to buy. But buy it because you want it, not because you think you can get in on a rising market. The Ferrari rush is over and not likely to happen again. The GTB 4 is a good example because of its reasonable 1984 price. If Tom had been a wealthy man, he could have bought a 1961 250 GTO that year for about $700,000. (Only 39 GTOs were built, so they have long been among the most expensive Ferraris.) At the peak of the frenzy, a GTO sold for a reported $15 million. Today, that same car is worth perhaps $3 million to $3.5 million.

That was the Ferrari roller coaster. What in the Commendatóre's name caused the greatest run-up of prices and subsequent drop in automotive history? Mike Sheehan, who operates European Auto Sales in Costa Mesa, California, thinks he knows how it started.

"Baby boomers went to college in 1965, and we all read Road & Track and Car and Driver; we all [read about] the Ferrari Luso and the LM and the GTB 4," Sheehan says. "And right next to the road test of the GTB 4 was the fold-out of Miss October. Our dream was to have a hot lap in that GTB 4 with Miss October. Of course we didn't have the cash for more than a pizza at the time, but we went on to become doctors and lawyers and stockbrokers and successful businessmen, and suddenly it's 1984; we're having midlife crises and everyone starts to fulfill his fantasies. At least the car part. We had too many boomers with too many midlife crises in too good of an economy chasing too few cars. It simply got out of control."

That's as good an explanation of how it all started as you'll come across. But what drove this group of midlifers to compete for a small number of cars made those purchases, well, pure. They were enthusiasts buying Ferraris--and Lamborghinis and Maseratis and other exotica as well--because they wanted the cars as cars.

It would have been logical to expect that as soon as the available supply of fantasies had been fulfilled, the urgency would flag and the market would stabilize at a reasonably higher level. And it probably would have if the stock market hadn't tumbled.

Another set of players arrived.

"I think a lot of what got the craziness going had to do with the stock-market crash of 1987," speculates Rick Cole of World Classic Auction and Exposition in Danville, California. "An enormous amount of money came out of the market looking for other places to go. People saw they could buy and sell things like watches and art quickly and profitably. Cars simply became another commodity."

So a second wave of demand for that very finite group of Ferraris arose. Econ 101 taught us what happens to prices when the demand outstrips the supply. When prices began climbing rapidly with no end in sight, the final group of players showed up.

"It was the speculator/investor who drove the cars up," says Gerald Roush, who publishes the Ferrari Market Letter. "At the time, we said you don't have to be smart to make money in the Ferrari market, you just have to have some [seed] money. Anything you bought would be more valuable six months later. You buy a car for $100,000; six months later it's worth $200,000, You go down to the bank and borrow $150,000 on that $200,000 car; put that into another car, it goes up, borrow against it and so on. People were using the cars themselves as collateral to buy more cars."

There is a theory, championed by some, denied by others, that says the Japanese were instrumental in driving up prices. Of the experts I talked to, only Sheehan believes the Japanese were instrumental. The others say the number of cars that actually went to Japan was far fewer than to other countries and Europe. There were some spectacular prices paid by a few Japanese investors, which drew uncommon attention that sales across the other ocean did not.

Then, Roush explains, the speculators began selling to one another, typically taking cash and a car.

"That added to it," Roush explains. "You'd hear these tales about how much a guy got for his car. He'd say, 'I got $700,000 for my car.' What he wouldn't say was he got $100,000 in cash and a car he valued at $600,000. He would have to get that $600,000 before his car was truly worth $700,000. And it worked as long as the greater-fool theory worked. Once the market ran out of greater fools...."

Crash dive.

"Those who saw the proverbial stuff heading for the fan were able to dump their inventories and save their lives," Sheehan says. "Those who continued the madness and bought all the way to the top are wiped out today."

There's more to Ferrari than just baby boomers and speculators. After all, Ferrari isn't out there in the world by itself. Other manufacturers have left their own indelible marks on automotive history: Lamborghini, Maserati, Alfa Romeo, Lotus, Jaguar, Porsche. So why is Ferrari the most coveted, the most expensive to own today? There is no simple answer, but it most certainly involves two key ingredients: Enzo Ferrari and racing.

Ferrari was born in Modena in 1898. During the First World War, his father died, the family business was sold and Enzo went into the army. He contracted an illness, was discharged and went to Turin, where he began working in various businesses involved in the young automobile industry. He eventually got a job at Alfa Romeo as a mechanic and ultimately worked his way up to a seat on the factory racing team. Historians have found definite proof of Ferrari competing in only 21 events between 1919 and 1931. He won some crucial races, however, with the most significant in the Circuit of Savio in Ravenna--which he dominated--winning and setting the lap record.

That race also serves as the most widely accepted version of the origin of the car company's distinctive logo. According to legend, the father of an Italian air-force ace, killed in the war, invited the young Ferrari to dinner to celebrate his marvelous drive. There he presented Ferrari a piece of airplane fabric bearing his son's squadron emblem for good luck: a prancing black horse on a yellow field.

In December 1929, Ferrari formed Scuderia Ferrari after Alfa decided to withdraw from active factory participation in racing. Ferrari maintained an agreement with Alfa to continue to race its products--an arrangement that ended in 1939. In December that year Ferrari agreed to build two cars for the 1940 Mille Miglia. Although by agreement with Alfa, these cars couldn't bear his name, they were, in fact, the first "Ferraris."

The first true Ferrari, the 125, was built in 1946 and won seven races in its maiden year, firmly establishing the Ferrari name in international racing. For several years, Ferrari built single-purpose race cars only; then in the early '50s, he began producing dual-purpose race/street cars, which inevitably led to the production of street-only cars along with race cars.

Enzo Ferrari was also building a legend about himself, as domineering race-team manager, as brilliant businessman, as womanizer. His cars became famous as he became famous. No other racing manufacturer was as successful, no other owner as renowned. Then and now, to own a Ferrari of any kind is to own a piece of the legend, to share a unique driving experience with drivers such as Nuvolari, Ascari, Hill, Shelby, De Portago, Moss.

In essence, the legend Ferrari was building on the track could be vicariously enjoyed by anyone for the price of a street Ferrari. While the mythology around the Ferraris of the past continues to grow, it is also being fueled by the continued presence of Ferraris on the track and the company's ongoing dedication to new models that spark the exotic-car-loving public's fantasy. Ironically, the Old Man (as he was affectionately called, although never in his presence) was not very interested in street cars. Racing was his ion; street cars were necessary to feed that ion. He died in 1988, and, with that ion gone, the Ferrari Formula One Grand Prix team has been struggling. But the prancing horse on the Italian-red, single-seat race cars is still a potent part of the Forumla One scene, and some recent changes in the technical staff promise to have Ferrari back in the winner's circle in 1994.

The giant automaker Fiat now owns Ferrari, and its emphasis has been on building and selling street cars at something more than the previous -the-race-team level. Unfortunately, the recession has hurt Ferrari sales, which were never more than 5,000 cars a year--1,000 in the United States in the best year--but certain to be lower this year. The Italian political and financial scandal has also had an impact on sales inside the country because many potential buyers are reluctant to put on ostentatious displays of wealth.

Ferrari is offering a wide variety of models for 1994. The 348 is the latest in the 3-series of midengined, V-8 sports cars. The 348TS has a Targa-style roof and lists for $117,000. The 348TB coupe is $111,800. The Spyder roadster lists for $121,900. The Testarossa ("Redhead"), now called the 512TR, has a flat 12-cylinder, midmounted engine and lists for $195,600. Although production of the $113,000 Mondial Cabriolet has stopped, there will be models available for some time. The limited-production F-40, often called the fastest production car in the world, was built in commemoration of the company's 40th anniversary and is the most desirable contemporary Ferrari from the viewpoint of a collector/speculator/investor. It was never certified for sale in the United States due to emission regulations from the Department of Transportation. At one time, the wait for an F-40 was two to three years, and places in the waiting line were selling for $1 million. But prices have fallen well into the six-figure range.

And what about the true, collectible, vintage Ferraris today?

David Gooding, the head of the car department at Christie's auction house in Beverly Hills, says it's a great time to buy. "The prices have come down dramatically. We've seen the bottom end. There are some great cars on the market right now priced reasonably."

Sheehan agrees. "I perceive we are at the bottom of the market. Prices have been relatively stable for the entire year."

Cole also sees it that way. "This is a good time to buy a Ferrari. There are some great buys. Daytona Coupes are starting to make sense again at $125,000."

There's also some activity in the marketplace. "There's a lot of action going on. We've gone from one or two sales a month to 10 or 12. In another year, I expect to be up to 20 cars a month," Sheehan says, explaining why he, too, believes the bottom has been reached and the time to buy is now.

Roush tracks prices through the classified ads that run in his market letter, and he says we've seen the bottom.

"Over the last two years, the average price was down about 40 percent," Roush says. "The first six months of this year, the average fell just 5 percent."

But none of these experts sees the market shooting back any time soon, and certainly not to the level of the crazy '80s.

"The market is still being held down by a lot of 'bankruptcy' sales," Roush says. "Banks and lending institutions own cars, and after awhile they're ready to take a loss and write it off. That's why there are some freak bargains out there."

"In the long run, they will appreciate, but it's not going to happen in a year or two," Gooding believes. "It's going to take five years plus before we start to see things turn around."

And what is the cost of some of those "bargains?"

"Dino Spyders are in the $70s; coupes are in the $60s" Roush says. "The 308's are generally in the $30s. You can get a 308 GTS for $35,000 to $37,000. A 308 GTBi that cost $48,000 new, you can get for $35,000."

For larger pocketbooks, a 512 BBi Boxer should be about $120,000, a 275 GTB or a Lusso can be had for under $200,000. The GTB 4 is about $300,000, and a GTO about $3 million or so.

"Everything out there is a bargain, compared with what they once cost," Sheehan says. "So buy whatever you like. If you're buying to make money, you're making a mistake, but if you like it and have always wanted it, buy it."

Mike Knepper is a free-lance writer who specializes in automotive subjects.