Monday 17th December 2007

Million Pound Morning

Ollie Stallwood finds out what it feels like to spend a million pounds on supercars in one morning...

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Put them on my tab...

In 1985 a film came out called Brewster’s Millions, starring Richard Prior and John Candy. The premise of the film was Montomery Brewster, a minor league baseball player, had to blow a few million dollars in order to inherit $300million. I don’t remember if the film was any good, or much about the plot for that matter, but I do remember for years thinking about what I would blow a shed load of cash on if I had to. Like me, I suspect the first thing most people would do if they had a few million to waste is walk into a [insert the manufacturer of your dream car here] dealership and give the salesman a suitcase full of money. This got me thinking – what would it actually be like to blow a million quid on cars in one morning? Mindful of the harsh reality I would likely never have the opportunity to do it myself, I headed off to meet the guys at supercar club P1 to find out.

P1 was one of the pioneers of the concept of shared access to supercars when it was launched back in October 2000. In the last seven years it has carved out a reputation as possibly the best of its kind and many other similar ventures have sprung up to cash in.The concept is simple - P1 gives members the opportunity to drive some of the world’s most exotic cars without the usual headache of ownership. In return for an annual membership fee the club takes care of depreciation, maintenance, insurance and storage. Members exchange their points for driving time in cars throughout the membership year. The car’s group decides how many points are used on the booking and the vehicles range from a Merc SLR and Ford GT to the lower category Porsche Cayman S and Caterham Roadsport SV. The Porsches, such as the 997 Turbo and GT3 RS, are swapped every four months.

Not only is the company constantly in the process of renewing the fleet, because of its good relationship with manufacturers it has on order a lot of vehicles as yet unreleased, only normally seen in grainy spy-shots at the Nurburgring. If anyone knew about blowing obscene amounts of money on supercars P1 had to be it and I was keen to find out what goes through someone’s head when they shop for cars in the same way I might for groceries. I travelled to P1’s headquarters in Leatherhead and waiting for me was the company’s chief executive Michael Breen and Nick Bailey who is managing director of P1 North. To give you an idea of the buying power of these men they recently confirmed a shopping list in one morning that read: Two Ferrari F149’s, two Audi V10 R8’s, two convertible R8’s, an Audi RS6, an Aston Martin DBS, a Ferrari 430 Scuderia and a 997 Porsche GT2. Considering some of those cars have not yet been released it is difficult to calculate the cost for that lot, but rest assured it will be well north of £1million.

They tell me the process of buying such vast quantities of cars involves sitting down and discussing what makes a good P1 car and what colours would be best for their purpose. P1 also informally discusses with members what they would like to drive, which also goes into the mix. Mr Breen says P1 is at the same level on the order list as stars like David Beckham and Jay Kay when it comes to buying cars. I ask him whether, after years of buying expensive cars, it starts to feel like the same as you or me popping down the shops for some milk. ‘We sometimes pinch ourselves when we are buying a lot of cars,' he explains.' 'We try not to become too numb to the process otherwise we would turn into people who don’t realise what they’ve got.’

Picture: Michael Ward/ Auto Italia magazine

P1 is one of the largest buyers of supercars in the world and at one point the company bought 44 Porsches in one year. Mr Breen said one of the best bits about buying the cars is seeing one of the first in the country of a particular model being delivered to the premises. ‘People look out the window and they’ve never seen a Ferrari 599 before. That is fantastic.’ So does the P1 management have a go in the new cars before the members get their hands on them? ‘We might have a drive around the car-park,’ he says with a smile. ‘We have to give them a shake down as they say.’ The 599 is the car everyone wants to drive and when asked if he regrets any purchases Mr Breen can only think of one car – the BMW Z4M. Not because it is a bad car, he explains, but because no one wants to give it a chance. ‘If I was driving home on lanes and back roads, that is the car I would take. But a lot of members don’t like it. The suspension is so hard you can lose your fillings, it catches them by surprise.’ Cars P1 are still unsure of are the Lambo Gallardo Superleggera, which they say will have fearsome depreciation, and the Merc AMG C63, which people want but may not fit in to the P1 ethos.

So what are the downsides of buying such a large amount of expensive cars? ‘It is exciting but we are in our eighth year, the fleet is worth £6million and every year it depreciates 20 to 25%. That’s between 1.2 and £1.5million a year – that’s the bit that focuses the mind,’ he says. As a car fanatic though the idea of being surrounded by exotic metal all day is a dream come true for Mr Breen. ‘The best thing is loving what you do, there are too many people who don’t like what they do,’ he says. ‘It’s the best job in the world.’

[smele]

The fleet is worth £6million and every year it depreciates 20 to 25%. That’s between 1.2 and £1.5million a year.

Ouch, that's harsh when you put it into real numbers.

[The Hitman]

smele said:

The fleet is worth £6million and every year it depreciates 20 to 25%. That’s between 1.2 and £1.5million a year.

Ouch, that's harsh when you put it into real numbers.

Well it wouldn't depreciate and at £1.2 - £1.5 mil a year, with in 6 years they'd be in negitive figures which wouldn't happen. The value of the cars may lower every year by a certain percentage, but that doesn't mean it'll be by £1.2 million.

[jon-]

The Hitman said:

smele said:

The fleet is worth £6million and every year it depreciates 20 to 25%. That’s between 1.2 and £1.5million a year.

Ouch, that's harsh when you put it into real numbers.

Well it wouldn't depreciate and at £1.2 - £1.5 mil a year, with in 6 years they'd be in negitive figures which wouldn't happen. The value of the cars may lower every year by a certain percentage, but that doesn't mean it'll be by £1.2 million.

Unless they're constantly recycling their fleet buy selling old and buying new, then they could sustain such insane depreciation.

I'd run a company like that for 20k a year profit to pay myself if it meant i had the keys to all those cars

[v15ben]

They definitely buy and sell regularly to be able to sustain such insane levels of depreciation, but with the membership fees in 5 figures, at least some of this outlay is recouped. Even more scary though is that some of the cars must be purchased at over-list price to ensure exclusivity of having the latest models, so that must give an even bigger hit when they come to sell 2 or 3 years down the line.

[archibold]

The Hitman said:

smele said:

The fleet is worth £6million and every year it depreciates 20 to 25%. That’s between 1.2 and £1.5million a year.

Ouch, that's harsh when you put it into real numbers.

Well it wouldn't depreciate and at £1.2 - £1.5 mil a year, with in 6 years they'd be in negitive figures which wouldn't happen. The value of the cars may lower every year by a certain percentage, but that doesn't mean it'll be by £1.2 million.

It probably would as they are mostly taking the first year hit (usually the biggest) and don't get to keep the cars for a few years until they have been depreciated to zero book value in the accounts. Not unreasonable to write off assets like these in 4 to 5 years, accountants usually want prudence so better to over provision than be caught out and have to restate accounts...

Archibold

[will_]

v15ben said:

They definitely buy and sell regularly to be able to sustain such insane levels of depreciation, but with the membership fees in 5 figures, at least some of this outlay is recouped. Even more scary though is that some of the cars must be purchased at over-list price to ensure exclusivity of having the latest models, so that must give an even bigger hit when they come to sell 2 or 3 years down the line.

I doubt they pay premiums for anything now, they are big buyers and are likely to be on any waiting list as a priority client - meaning they'll buy new and pay list. In fact premium cars are where some of the depreciation costs can be mitigated here, as the value tends to be nearer list when they come to sell.

[andypowell]

no wonder P1 is so expensive to join, better value clubs out there imho

[Beefmeister]

Yep, i'll stick with my ecurie25 membership thanks...

[Trenchtown]

I've always loved the concept of these clubs, but when I read this it almost looks like a money laundering operation... how on earth do they cope!??!

New Porsches every fourth month?

[belleair302]

Ever wondered why there are so many 997's, 360's etc on sale with around 16K miles on the clock???? The running costs must be huge on these cars for clutches, brakes, tyres, front end resprays and basic servicing!!!

[andyps]

There was an article in a magazine relatively recently about the costs of the various cars in the fleet. One or two were pretty eye watering, but I think it was things like the Porsche's which cost them the least to run.

Not much need to feel sorry for them over the depreciation. The fact that they are still in business after 8 years indicates that they are doing OK out of it!

[Mattt]

You forgot to add the link in to complete the advertising

[lordlee]

Didn't Chris Harris do exactly the same story as this on autocar video's?

[MrKipling43]

lordlee said:

Didn't Chris Harris do exactly the same story as this on autocar video's?

I was getting deja vu too.

[sprinter885]

andyps said:

There was an article in a magazine relatively recently about the costs of the various cars in the fleet. One or two were pretty eye watering, but I think it was things like the Porsche's which cost them the least to run.

Not much need to feel sorry for them over the depreciation. The fact that they are still in business after 8 years indicates that they are doing OK out of it!

Yep- I remember same article. It included (IIRC) something like £30grand in one year on one Lambo-mostly clutch & brakes.

p.s. is Damon Hill esq still part owner of P1 ?

Edited by sprinter885 on Saturday 15th December 10:12

[J111]

Trenchtown said:

how on earth do they cope!??!

Easy. The average member pays about £200 per day they use the cars. Depreciation costs would be covered by 80 members and 25% usage (80x200x(365/4)). Obviously there are considerable costs other than that of depreciation, but, then, there are considerably more than 80 members and, hopefully, for all concerned, far better than 25% uptake.

Nobody with a decent business model would 'spend' a million in a morning, in any meaningful sense. All the cars can be financed up to the hilt at fairly reasonable finance rates. Some guy (me) spent a very long time sorting out the financing for one high end car club, get it right and there's good money in the business.

That being said, I wouldn't touch them, as an investor or a customer, with a barge pole. It's only going to take one high value lawsuit against someone's insurers and already nervous underwriters will drop them like a stone.

[andyps]

sprinter885 said:

p.s. is Damon Hill esq still part owner of P1 ?

Not any longer - he pulled out due to management style reasons or something similar.

[Gretchen]

Unfortunately Montgomery Brewster, although having £30 million to spend over 30 days was unable to show any assets for it. Even with that depreciation, you're on to a loser. Sorry.

[XaveOxf]

I'm actually a member of P1 since september. I've only driven a couple cars so far and enjoyed every minute of it! The service has been great so far.

I chose them over ecurie 25, despite the premium, mainly because they were closer to my office and of their wider choice of cars. My next rental is already booked for the weekend of my wife's birthday: the Aston martin Vantage V8. Also, I'll drive the 430 F1 to France in may.

[andyuk911]

They often sell them as one owner cars ...