How to buy a supercar
The rewards of investing in a hallowed set of wheels are obvious – you end up with your dream car in the garage and get to watch it appreciate with age. Here, John Evans tells you about the risks
Potential pitfalls revealed
My neighbour James Roxburgh has a problem: his 42,500mile, 1997-reg Ferrari F355 Berlinetta manual is now worth so much money, he daren’t drive it. He paid £34,000 for the car five years ago in a private deal but has just been offered £80,000 for it by a specialist dealer.
“When I bought it, I assumed it would never fall much below £35,000,” he says. “Now I daren’t take it out of the garage in case I damage it.”
Welcome to the crazy world of used supercars, where prices for the best examples mean enthusiasts like James have cars so valuable, they’re terrified to drive them. Tim Marlow, head of the prestige division at Magnitude Finance, a vehicle finance broker that will do £75 million of business this year lending about £70,000 per car, says the rising numbers of lenders is partly to blame.
He explains: “It’s very competitive and some of them encourage customers into deals by selling this fantasy of all cars going up in value month after month. Some, like the Ferrari F355, do – although they have to be dead right, mileage and provenance-wise – but others, like the Ferrari Testarossa, peaked a couple of years ago and have actually started to drop back. Despite what some lenders say, not all supercars are guaranteed to make money.”
Marlow says responsible lenders need to know what’s rising in value and what isn’t because many purchases are financed on a form of hire purchase that has a final payment, called a balloon, at the end of the term. The higher the balloon, the lower the monthly repayments.
However, the customer has to eventually pay the balloon – unlike a personal contract purchase deal, there’s no handing the car back and walking away. A 60% balloon on a Lamborghini Gallardo is typical but if the car isn’t perfect in every way, it won’t be worth that. This means that should the owner try to sell it to the trade to settle their debt, they may face a large shortfall.
As Clive Wilson, supercar editor at CAP HPI, explains, that would most likely be the case right now. He says that as winter approaches, the supercar market is cooling down: “The heat’s going out of it, especially on some older cars. The Ferrari and Lamborghini market has been extremely strong and 18 months ago
you could name your price on a F355 or F550. Today, prices are sensitive to colour, specification and history, with a wide gap opening up between the best and worst cars.”
Cars you’re scared to drive, balloon payments you can’t afford, some cars worth much less than others – it makes you wonder why anyone would buy a used supercar until, that is, you sit in a Ferrari and imagine cruising down the high street. One man who spends his days turning that dream into a reality is Mark Rose. He is head buyer at HR Owen, the supercar dealer group. His team feeds the sales force with everything from Lambos to Bentleys, Astons to Ferraris. They buy 45 cars a month, 80% of them from private sellers – and there’s no room for error.
“Our appraisers have a four-page vehicle inspection form they must complete,” Rose says. “They follow
It’s very competitive. Despite what some lenders say, not all supercars are guaranteed to make money
Clocking is a growing problem. One in every 16 cars HPI has checked has had a mileage discrepancy
that with a walk-around video of the car. Me and my fellow buyers then give our opinion before any deal is done.”
Naturally, Rose and his team know their prices but, crucially, they also know what it costs to prepare a car for sale. The last thing they want is Barry Ebbs, service advisor at HR Owen’s workshop in north London, hitting them with a huge pre-sale prep bill. I join him as he inspects the underside of a Huracán.
“I’m looking for speed-hump scrapes,” he says. “The lip spoiler suffers if the car hasn’t got the lifting kit, which can’t be retro-fitted to this model. Heat wear on discs and tyres from track days can be an issue too.”
Back on all four wheels, he fires up the Lambo’s engine before slipping a borescope between the cylinder banks to check the engine number against the manufacturer’s records and what is recorded on the V5. Rose chimes in: “We cross-check everything. For example, who is the owner of the car, as distinct from the keeper? Does a company own it? If so, is the company being wound up and are we about to buy a car that now belongs to the administrators?”
Signs of clocking are high on his team’s radar too. “It’s a growing problem,” says Rose. “But where people think of it as winding 50,000 miles off a 100,000-mile Mondeo, we’re talking about winding 8000 miles off a 10,000-mile Aventador.” HPI, a vehicle data company, says that, so far this year, one in every 16 cars (all types and not only supercars) that it has checked has had a ‘mileage discrepancy’. In 2014, it was one in 20. An HPI spokesman says PCP deals are partly to blame. “People choose a lower annual mileage to keep them affordable and then overshoot,” he says. “If their circumstances have changed and they have to hand the car back to the finance company, they’re hit with an expensive penalty. Having the car clocked is often cheaper.”
And circumstances do change to the extent that someone who has a supercar on finance may no longer be able to insure it. Last year, HPI Crushwatch, the service that enables the police to reunite uninsured cars with the finance companies that own them, saved two Aventadors, two Huracáns, four Ferrari 458s and one Mclaren 12C from the police crusher.
But despite all the risks, new players are still entering the supercar market. One of the latest is Renaissance Classics, in Ripley, Surrey. It specialises in Ferraris and Porsches, and began trading in May. It’s early days – so far the company has sold 20 cars – but founder Keith Sohl has big ambitions.
“We’ve almost finished building a row of air-conditioned garages at the rear of the main building from where we’ll sell the most expensive supercars on behalf of customers,” he says. “The service will be secure, discreet and expert, which is the environment these superexpensive cars need.”
Meanwhile, out front, Sohl plans to add to the company’s growing stock of what he calls ‘turnover cars’ (£50,000 911s – the 996 series is popular with first-timers – the occasional R8 manual and Ferrari F348s, 430s and 360s) plus sub£100,000 ‘investment cars’.
Some customers buy six at a time. Their money’s making nothing in the bank, so if they buy right, why not?
“Some might say we’re entering the market just as it’s plateaued but all markets have their cycles, even the cars themselves,” says Sohl, whose personal collection includes a Ferrari Dino 246. “For example, the Ferrari Mondial may be cheap and unpopular but it’ll bounce back. It’s a Ferrari, it’s not made any more and the number of Mondials is falling, so it’s inevitable that values for the best will start to rise.”
About 250 miles farther north in Knaresborough is a supercar dealer that started not last May but 20 years ago. Today, Redline Specialist Cars is possibly the UK’S most successful supercar dealer, selling 300 a year.
“All things are relative but supercars really are much more affordable these days,” says John Graeme, the sales director. “Some customers buy as many as six at a time for investment; their money’s not making anything in the bank, so if they buy right, why not?”
First-timers might begin with an older R8, a 911 Turbo, a 430 or a Gallardo, he says, before, after a couple of years, moving on to a 458, a Huracán or a 911 Turbo S. After that, it’s 488, Aventador S, F12 or Mclaren. “It’s a buoyant market with no signs of Brexit jitters,” says Graeme. His tip for future stardom is a 2012 911 Turbo S: “It’ll set you back around £105,000 but it’s a special model that, crucially, is in limited supply. Also, the Aventador SV – now making £300,000, up 20% in the past couple of years.”
But what if you cut dealers out of the loop by buying at an auction? What kinds of supercars end up here?
BCA Blackbushe hosts what it calls a Top Car sale of prestige and performance cars twice a month. If you’re lucky, there may be a couple of other prestige sales running as well. I’m lucky. The day I visit, HR Owen and Porsche Retail Group are offloading below-par trade-ins.
There are some tempting pickings (see box, below left) but, as with all auctions, it pays to go a few times just to get used to the system, the pace and, of course, the prices. Take a friend or a specialist technician who knows their supercars.
Some cars are covered by BCA’S Assured scheme, a 30-point AA mechanical check that costs £40. However, the cars I’m interested in are simply described as having no major mechanical faults, or sold as seen.
Among the Top Car lots is a 39,000-mile, 2005-reg Ferrari F430 F1 Spider. Finished in red, it has had six services (the last one at 38,000 miles) and three keepers. It’s not in the best condition (the nearside front wing has had paint, the driver’s side mirror is taped on and one corner of the hood is slightly damaged). If I were buying, I’d go through that service history carefully and try to check if the exhaust manifold is cracked (a problem on the 430). Bids reach £64,600 before it is withdrawn.
It’s not the only one that fails to meet its reserve. Still, that’s to be expected when you have cars entered by individuals. After the sale, the auction company may act as go-between, enabling buyer and seller to agree a deal. In group sales, like HR Owen’s, cars tend to sell on the hammer because corporate sellers can afford to spread their gains and losses across multiple lots. Still, buying at auction is not for me. Until I can afford to run a supercar, never mind buy one, I’ll duck out.
I leave with Wilson’s words of warning ringing in my ears: “If a supercar goes through the auctions, there’s a usually a reason – the wrong one.” Perhaps I’ll just go round to James’s place and we can look at the F355 in his garage, while he tells me how much he’d like to drive it, if only he could afford to.