The topic of “Car Flipping” is often discussed on automotive forums with community members expressing their disappointment at not being able to obtain the latest high performance modeles from Porsche, Ferrari etc.
What is Car Flipping
Car flipping is the practice of selling your new car for a premium with delivery miles without even driving it, or in some cases selling the build slot before the car is even delivered. Or as Sam from Seen Through Glass/Behind The Glass explained in his recent podcast on the topic of car flipping:
“People are buying cars with the sole purpose of selling them, potentially even before they have been built or as soon as they take delivery”
The most honest insight into the world of car flipping that I have found comes from Doug at VinWiki
The practice of car flipping has been going on for many years, but in my opinion really came to the fore with the launch of the Porsche 911 R in 2016. Only 911 units of the 911 R were manufactured and offered to Porsche’s best and most famous customers. Given the limited edition status of the 911 R it was in strong demand by well healed car collectors and Porsche aficionados. This lead to cars being sold for more than half a million dollars (GBP 450k). More than three times the UK list price of GBP 137k.
And main dealers are making the situation worse. In many cases the car is being resold by the dealer on behalf of the owner without it ever having left the showroom. The dealer makes a profit on the original sale and then a margin on the resale. Therefore, it is actually in the dealers interest to sell cars to buyers who intent to flip the car.
Why is Car Flipping a Problem
If you are a car enthusiast who would like to buy and drive a GT series Porsche or hardcore Ferrari you will not be able to purchase the car from the manufacturer unless you are a celebrity or have a long history of owning cars from that manufacturer. Even then there is no guarantee you will get offered the chance to actually purchase a car.
For example Porsche Centre Sheffield confirmed that they would allocate the new Porsche 991.2 GT3 to customers based on the following criteria:
1. Must not have owned an exclusive product and sold it on within the last 12 months
2. You must have purchased a minimum of 10 Porsches from the centre
3. You should be known to the centre as a long term keeper of Porsche Vehicles
4. Geographically local and a supporter of the Centre
5. Loyalty to the centre
In the US when Porsche were struggling to sell the 918 Spyder hyper car they created a VIP program where owners who kept their car for more than 36 months years would automatically be offered the chance to purchase every new car for the next 10 years. If the 918 Spyder was sold after 6 month but before 36 months the duration of the VIP program for that customer was reduced to 3 years.
In his “Biggest Ferrari Myths” video Alejandro Salomon suggested that to be offered the chance to purchase a Ferrari LaFerrari hypercar you would need to already own the 250 GTO or 288 GTO, the F40, the F50 and the Enzo. In another video Salomon concluded that if you actually wanted to own a LaFerrari you would be better off paying the flippers premium and buying the car that you want today rather than trying to buy all cars required to potentially qualify for the car that you really want at some point in the future.
What are Manufactures doing about Car Flipping
Following the customer backlash around the 911 R Porsche launched a Touring Pack for the new 991.2 GT3 in 2018. With the Touring Pack the regular GT3 now looks almost identical to the limited edition 911 R. Owners who paid big premiums over list to buy 911 Rs now saw a regular model released for a fraction of the price that they paid. Was this Porsche’s way of telling customers not to buy flipped cars?
Porsche GT boss Andreas Preuninger has stated that “We are monitoring very closely who is flipping cars” and that “I personally like to see my cars being used. That’s what we build them for. They are just too good to be left to stand and collect dust…I don’t like this business of people buying our cars to make money on them. That was never our intention,” he said.
“The purpose of limiting a car is not for it to gain value. We don’t want to be laying money on each car’s roof when they run out of the factory.”
In March 2019 Porsche CEO Oliver Blume proposed a subscription model as a potential solution to speculators buying the firm’s limited edition cars to sell on at huge profits. He explained that “One thing we could do is look at leasing models to try to avoid this kind of dealing, so the car doesn’t get sold on for a period of time. It is one solution.”
For the new Ferrari 488 Pista (the track focused version of the regular 488 super car) a list of criteria for selecting who would be offered the chance to purchase the car was leaked online. As you can see from the criteria Ferrari are trying to make sure that the cars go to people who will keep the car for the medium/long term rather than flip them for a quick profit. But given that the criteria are mostly owning other limited edition Ferrari’s how do you join the club if you are not already a member?
However, having a collection of rare Ferrari’s does not automatically guarantee that you can you will be offered the opportunity to purchase the latest limited edition hyper car as Ferrari Collector David Lee found out when he tried, unsuccessfully to purchase the $2.2-million LaFerrari Aperta.
With the launch of the new Ford GT it is understood that Ford asked owners to sign a contract agreeing that they would not sell their car within a period of 2 years of taking delivery. There is currently a high profile case in the US where Ford is suing WWE wrestler John Cena for for flipping his GT within one month of taking delivery. It will be interesting to see the outcome of that case when it gets to court. In his defense John Cena is claiming that the dealer asked him to sign multiple contracts and not all of them mentioned the 2 year ownership clause.
So it appears that manufacturers are starting to take steps to try and reduce car flipping. If these measures will actually have an impact on car flipping or if they are merely paying lip service to disgruntled potential customers remains to be seen.
How to stop Car Flipping
For me it is simply of case of supply not being large enough to meet demand. This is particularly acute in the United Kingdom where driving on the opposite side of the road to the rest of Europe combined with London being one of the worlds most affluent cities creates huge demand for the latest high performance cars. Sam from Seen Through Glass/Behind The Glass discussed the topic of Car Flipping one of his recent YouTube videos.
“I don’t think you can ever erase car flipping…people are too rich, and rich people will pay whatever they want to get whatever they want”
In his provocatively titled video Is Your Dealer Lying To You? another YouTuber called JayEmm on Cars also shared his view on the truth about buying Porsche GT cars that everyone knows, but is afraid to say.
From my perspective the solution is for manufacturers to sell more cars, or more specifically sell a car to everyone who wants one. If everyone who wanted a car could buy it at list price and spec it exactly how they wanted it, then the market for car flipping would be significantly reduced. Of course there will always be a small number of people who want to jump the queue to get one of the first cars that are delivered. However, I’m confident that the majority of people would be happy to wait to get their car, at list price, specced exactly how they want it rather than paying a significant premium or missing out on the car entirely.
Some will argue that by increasing the number of cars being manufactured that the exclusivity will be reduced making the cars potentially less desirable. For some car collectors this might be the case. But again I am confident that the majority of people would prefer to own and enjoy the car as it was intended, even if it has a lower rarity value. In 2017 Ferrari sold 8,400 cars compared to 6,465 cars in 2007. So supply has already grown significantly in the last 10 years and continues to do so. Owning a Ferrari is already not as exclusive as it once was.
Are Porsche, Ferrari, Ford and other manufactures going to build their high performance series cars in high enough numbers so that everyone who wants one can purchase one? Probably not. But unless they ramp up the production numbers significantly, the current measures to prevent car flipping are likely to have only a limited impact and the practice of car flipping will continue.