Journal: Are We On The Verge Of The Next Classic Car Bubble?

Are We On The Verge Of The Next Classic Car Bubble?

By Michael Banovsky
February 5, 2016
5 comments

Photos Courtesy of Auctions America & Russo and Steele

Results from the first two major classic car auction venues of the year are in, and on the surface, they’re less than impressive. We reported that the events in Scottsdale, Arizona showed a pullback of about 15% from 2015; the recently-concluded auctions in Paris, France centred around Rétromobile showed a similar shrink in prices and bidder activity.

Admittedly a tiny piece of the overall picture, these huge auctions can be interesting barometers for which direction the classic car market is going in.

Superficially, it’s not necessarily important why a lot is being offered—just that once the papers are signed, it’s the auction company’s job to get the best possible price for that car. They’ll get a cut, you’ll (hopefully) make bank, and everyone goes home happy. If auction companies do their job, they’ll attract and cultivate an appropriate group of buyers to appear at each of its sales—and, of course, be ready to accept impulsive celebrity bids.

Attracting a few hundred people to a beautiful venue (and beaming the show to many more at home) requires marketing and PR teams to place ads in magazines, reach out to local TV reporters, and sometimes drive Peel P50s through their offices. Hell, just getting the cars to a venue is a chore—there are photo shoots, catalogue descriptions, ageing mechanical components, and a healthy dose of international red tape.

I say all this because when the hammer drops on a particular vehicle, it’s the culmination of months of work and effort. Why do all this to sell cars that—like million-dollar Ferraris—should be able to sell themselves?

Because auction companies want to offer the best vehicles. They want to be a flag in a history file. They want the world to appreciate classic vehicles—and they’ll happily make money doing it.

The sheer volume of vehicles offered (and the confidential details of each deal) gives auction companies companies with valuable insight as to what might be the next “hot” car—so they can attract and offer the best examples before their competitors do.

Example? The Toyota 2000GT first cracked $1 million Usd. only three years ago, and they’re now known colloquially as “million-dollar” cars. As Jason Torchinsky noted in 2013, six years ago they were less than $400,000 cars. What’s a Toyota 2000GT really worth? I don’t know—ask an owner to sell you one and find out. Or ask the owners of the other Japanese classics, like Nissan “Hakosuka” GT-Rs, 240Zs, and Mazda Cosmos how much their car has appreciated over the last few years.

All of this is to say that with some money, consideration, time, and a bit of paperwork, getting your dream car is still within reach. It’s just different these days. You’re now able to equip yourself with a huge amount of valuation information through tools like Patina’s recently-launched price trends feature and Hagerty’s detailed tools. You’re able to join owner’s forums, ask questions, and figure out which cars might be right for you. Studying auction descriptions and visiting previews is a great way to quickly learn more about a particular make and model—and why one example is worth more than another.

As a whole, the market is correcting itself thousands of times each day based on what people want. If the car you want is down the street, walk over and make an offer. If the one you want is selling under the hammer of an auctioneer, practice your best arm raise.

If it doesn’t sell to the highest bidder, at least you know it’s for sale, right? Buy tastefully

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Randy Myers
Randy Myers
6 years ago

I saw on an episode of “Whats my car worth” where a high mileage, 80K+ Porsche 930 was sold at auction for big money, $90K. I can not imagine these less than perfect cars holding this kind of value. A lot of people are going to get burned if there is an adjustment of any kind.

geelongvic
geelongvic
6 years ago

Remember the Ferrari bubble and crash of 1989-1990. Don’t forget the “Greater Fool” theory. Non car enthusiast were then as now asking how they too could buy one (even though they knew nothing about them) so that they could resell them for a profit. These non-enthusiasts were buying Ferrari’s simply because they were appreciating so rapidly. We have been seeing a similar parallel in the current market with Ferrari’s and especially with mass production Porsche 911’s . Currently non-knowledgeable people have been asking my advice about what to buy now since “cars are hot”–this is a sure sign of a peak, an excess of “greater fools”.

Other signs of peak or the now beginning of the expected correction are the Seinfeld disposal and the entry of “new auctioneers” some with perhaps television/furniture backgrounds seeking new sources of commissions. Beware.

The Australian real estate correction is already beginning in Sydney and Melbourne, etc. with the developing retrenchment of the Australian real estate market. As well said by GS in his guess, beware, again.

I have never looked at cars as an investment but rather a pleasurable hobby, and remember we always pay for our pleasures since nothing is truly free, except our ultimate deaths.

There are multiple Petrolicious roads to driving and automotive pleasure. Avoid the current run-up in values and the attendant greed, be patient, and likely you will find your pleasure after the full extent of the correction, similar to the last Ferrari correction of the early 1990’s.

Ted Leithart
Ted Leithart
6 years ago

multi-million dollar cars and all that are fine – except for one thing.

They are cars and the gleam off the teeth of the driver enjoying a drive down a country lane, a local version of Moholland Drive or, in my area, flying don Davis Road along the Little Miami at 60-75 mph is MUCH more enjoyable than any gleam of the chrome or paint off these trailer queens.

HELL, James Jaeger used to drive his 250GTO to and from work on a regular basis is Cincinnati traffic.
Jim Ibold motored his way around Cincinnati for years in his Alfa Romeo 2900B.
Let the collector car market implode. I’ll be happy to see these cars on the road rather than pampered….

Drooling over owning these museum and trailer queens has become another form of masturbation. Very, very unfulfilling

geelongvic
geelongvic
6 years ago
Reply to  Ted Leithart

Ted,
I agree, and I drive my cars no matter what happens in the “market” and I have for years.

This year Ault Park features the Ferrari, I’ll drive mine there. Hope to see you.

Michael,
Hope to see you again this year. I’ll be at the Spring Thaw and then I’m driving to Colorado for the Silver Summit. If I don’t see you then in BC or Colorado, perhaps we see each other at the Maple.

GS,
Last year you weren’t too pleased about “Canadahodia” , and Michael and I invited you to join us in the Colorado Silver Summit. How about it?

Guitar Slinger
Guitar Slinger
6 years ago

OK … the extended version … starting out with a big Why Yes We Are !

Why you ask ?

1) Have a look at the markets worldwide . Recession is immanent if not a full blown depression …. cars and all collectables hold lower values when either comes into play

[ like to here the story of how my grandfather bought a Rolls Royce from Doris Duke herself for a whopping $150 during the depression .. cause he had cash and she needed it ? ]

2) The extensive tax dodges being pulled by wealthy collectors……. [ NYTimes and WSJ did full articles on that most expensive Ferrari featured here and the tax evasions going with it ,, along with multiple other recent sales …. not to mention recently here Montana plates showing up on an entire collection that obviously resides in the desert southwest .. wink wink ] …. and guess what ? Worldwide governments both local , national and international have had enough … and the ‘ dodges ‘ are about to come to a vicious and bloody end

Fair warning collectors .. the Tax Man Cometh … here its the IRS regardless of whether its a state thing or not … wink wink

( I’ve seen it first hand )

3) The excessive prices being garnered by many cars whose actual and real values are much lower is a sign the end is near . Desperate measures by greedy sellers and auction houses trying to take advantage of the waning days of the bubble

4) Even if none of the above were happening or true [ but trust me … the information though condensed is accurate …. and Something Wicked This Way d Comes for the well heeled collector … whether honest or not .. this I know first hand … we’ve personally had two completely above board situations get extensively investigated …. with one that should of been available to us [ privacy of sale issue ] blocked !

So in summation . Its coming . The only valid question being ;

When will it hit and how hard will it be when it does ?

I’ll take a wild guess and say ….. very very bad indeed