Economic stagnation combined with falling unemployment. Expansion in the money supply while inflation declines. A falling housing market nationwide at the same time as prices for London premium properties reach stratospheric levels.
Motorists all over the country are in despair about the costs of driving a standard family car and are increasingly resorting to car-share schemes to save money. Yet, in a period of such bafflingly contradictory economic signs, makers and vendors of luxury cars are laughing all the way to the bank.
Just this month, luxury car dealer HR Owen, which sells Ferraris, Bentleys, Aston Martins, Bugattis, Lamborghinis, Maseratis, Rolls-Royces, Paganis and Lotuses, posted “excellent” half-year figures showing a rise in sales of nearly 38 per cent. In the same period, the 80-year-old company’s profits were up nearly a quarter, and the dividend per share had doubled.
Funny money of all shades of dubiety is gushing into the market for old cars, partly because people with money are finding it so hard to find a place to park their funds where they might earn any kind of return
Those are big increases. What on earth is going on? How are these contradictory phenomena to be understood?
It’s not as simple as it might look on the surface. You might presume that what is true for HR Owen must hold good for all luxury car sellers in London. But, no. Porsche’s showroom in the City of London (always a key indicator for the mad oscillations of market confidence) is at present going through quite a flat patch in sales of some of its most expensive models.
According to insiders, the money flooding into top-end car dealers comes from the same sources as the tsunami of cash crashing into the high-end property market and surging across the tables of London casinos like the Playboy Club. It’s Russian. It’s Middle Eastern. It’s Indian, Chinese and South American.
A lot of it is hot, dirty money looking for a nice, spotlessly-laundered home. Much of it comes from people who have extricated funds from awkward spots like Libya. Another sizeable chunk comes from the wallets of footballers whose wage packets have still not been touched by recession.
That might explain why Porsche sales are far from buoyant in the City. Those city trader boys aren’t making what they call ‘serious money’ at the moment.
In any case, the purchasers of these insanely expensive cars couldn’t care less that they will lose up to a third of their value the instant they leave the showroom (in three years, an Aston Martin or Ferrari might be worth about half its original purchase price).
Prudence and reasoned judgement have about as much bearing on these purchases as do the religious principles that modest restraint should always be exercised over the exhibition of earthly riches.
And it’s not only the market in expensive new cars that has gone barking mad. Classic old cars are now changing hands at auction for the highest prices ever seen. This, however, should be seen as an investment market rather than a show-off circus.
Funny money of all shades of dubiety is gushing into the market for old cars, partly because people with money are finding it so hard to find a place to park their funds where they might earn any kind of return.
Even a derelict Aston Martin DB5 from the 1960s discovered in a barn and needing hundreds of thousands of pounds to be spent in restoration might fetch up to half a million under the hammer.
Buying luxury cars may not make as much sense as buying gold when it comes to long-term security, but it might be a good deal more entertaining.