Ferrari’s $52-million price tag reveals turbocharged market

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The colour of money is not green. It is red, Ferrari red.

More specifically, it is "rosso Cina" – Chinese red – the preferred colour of the Ferrari GTO 250s whose auction prices are going stratospheric, making them, and other classic racers, some of the highest-return investments of any asset class of the past half century.

In a private sale early this month, a 1963 Ferrari 250 GTO sold for $52-million (U.S.) to an undisclosed buyer. It was not just a record for a Ferrari; the price made it the most valuable car ever produced. Its original price was probably the equivalent of $25,000 (Canadian). The return works out to more than 200,000 per cent over 50 years.

Warren Buffett should have bought "those red Italian things," as car-nut actor Steve McQueen called them in The Thomas Crown Affair, and locked them away.

Never mind the 2008 financial collapse and the recession – the "investment grade" car market has been turbocharged in the past few years. The standout stars have been Ferraris from the 1950s and the 1960s, but classic Mercedes, Jaguars, Bugattis and Aston Martins, and the more modern McLarens, are also going for prices that would have seemed absurdly high only three or four years ago.

The past year or so has set rapid-fire records that have some collectors wondering whether classic racing cars are rolling bubbles ready to pop.

Last year, in another private sale, a 1962 Ferrari 250 GTO went for $35-million (U.S.), a record amount paid for any car at the time. The Ferrari, in a rather unattractive greenish yellow, was originally built for British racing legend Sir Stirling Moss.

In August, a 1967 Ferrari 275 Spyder convertible sold for $27.5-million at an auction conducted by Canada's RM Auctions. That was the highest price ever paid at a public auction in the United States. The buyer was reportedly Lawrence Stroll, the Canadian fashion entrepreneur who co-founded the Tommy Hilfiger brand.

Ferraris that used to go for hundreds of thousands of dollars are going for millions; ones that went for millions are now going for tens of millions. Collecting classic Ferraris has become the passion of billionaires. Mere millionaires are getting shut out. They will have to make do with Porsches, Maseratis and, if they're partial to thunderous American iron, Shelby Fords.

The Historic Automobile Group, which tracks vintage car values, says the price of old Ferraris rose 55 per cent in the 12 months to September, more than double the pace of Mercedes and four times that of Porches. In a recent article in the Guardian, Dietrich Hatlapa, the investment banker who founded the group, said it's not easy to explain the price surge. "It's a cocktail of things," he said. "Rarity, technical sophistication, racing pedigree and continued competitive success. But what you can say is everyone who buys one of these cars is passionate about them."

The long-term performance of investment-grade cars (not just Ferraris) has been outstanding. By the Historic Automobile Group's measurements, their value is up 430 per cent over ten years compared with 55 per cent for the FTSE-100 index and 273 per cent for gold.

Some collectors say year-on-year comparisons can be misleading because the market for vintage autos is thin so an outlandish price for a single car can skew the value index. Still, there is no doubt that classic Ferraris are going up in value. Scarcity of the old racing Ferraris and rising wealth among the wealthiest 1 per cent of the population seem to be driving the craze. "Like the high-end art market, there are only so many of these cars and when they sell, one wonders if they will come up again," Toronto merchant banker Joe Shlesinger, of Callisto Capital, says. "Once they are sold to a collector rather than a speculator, they are unlikely to switch owners again during our lifetimes, so if you want the car, you need to play right then or likely say goodbye forever."

The Ferrari 250 GT0 hits all the right buttons for wealthy Ferrari fans. The car is exceedingly rare – only 39 were made between 1962 and 1964. It also has cachet, because most were made for racing: The one that sold for the world-record price won the 1963 Tour de France long-distance race.

The 250 GTO was an end-of-era sports car in the sense that it was not just a track car. "It really brought to a close an era when a car could be driven to a circuit, successfully raced, and then driven home again," said an article on the marque in the December 2012 edition of Ferrari's in-house magazine.

The problem with Ferraris that go for the GDPs of some small countries is that they become too valuable to drive and display. "Will the fellow who insisted on buying [the $52-million Ferrari] privately show it publicly?" wrote auto journalist Jack Baruth on the website The Truth About Cars. "Or will it be like the hundreds of 1959 Les Pauls or other pieces of great artwork that hide in locked safes because their owners are afraid of theft or damage. … At what price do these cars simply disappear from view permanently?"