Car crashes are never good things, let alone something to celebrate. Nonetheless, in recognition of the 25th anniversary of the worst crash in the history of the car-collecting hobby, the largest of classic car insurance companies assembled a panel of experts Thursday to stage a sort of autopsy. Well, actually more of an exercise in forensic anthropology.
The point of the pathological exercise was to remind everyone of what happened back then, and to draw comparisons or contrasts to the recent escalation in the prices being paid for classic vehicles.
“Twenty-fifteen isn’t 1990,” said Don Williams, who’s been involved with the buying and selling of classic cars since he was 19 years ago and who, for many years, has been the owner of the acclaimed Blackhawk Collection.
Williams told the standing-room-only audience at the Penske Motorsports Museum in Scottsdale, Arizona, about spending $150,000 to buy a car — a Shelby Cobra, no less — during the frantic, speculator-fueled price run-up in the late 1980s and then, after that bubble burst and a panic-selling mentality took over, how in 1992 he had little choice but to sell that same car at auction in Arizona for $50,000.
Williams said a recession is when you see your neighbor suffer financial setback, but a depression is when you are the one suffering.
In the early 1990s, everyone suffered.
And with the recent surge in classic car transaction prices, might the same thing be about to happen again? “Boom or Bust? What 2015 Holds for the Market,” was the title of the Hagerty Seminars’ presentation that included Williams as one of seven panelists.
The consensus, as Williams noted, is that 2015 is not 1990. None of the panelists even mentioned the term “market correction.” And while many expect to see less dramatic growth in prices, they don’t anticipate a crash waiting around the next curve. And they offered several reasons:
In the late ’80s and very early ’90s, there was no Internet posting transaction prices within minutes of a sale.
“Nobody knew what cars were worth,” said Rick Carey, who began tracking and reporting those prices just as the bubble was bursting.
In the late ’80s and very early ’90s, speculators bankrolled by too-easy-to-obtain bank loans were the ones driving up prices, and selling the cars they bought not to collectors but to each other — at 20 percent markups — before the cars finally went into a collector’s garage.
Wayne Carini, long-time car-restoration specialist and host of the Chasing Classic Cars television show, shared the story of being asked by a bank to go to Florida to retrieve a Ferrari Daytona Spider on which it had issued an unpaid million-dollar loan. What Carini found wasn’t a true Spider but a Ferrari that had had its roof chopped off, that probably had cost $150,000 and enabled the speculator-buyer to simply walk away with $850K.
“A lot of that went on,” Williams said, noting one case in Europe in which banks lost $100 million on such loans.
And yet, it wasn’t all that long ago that people were buying classic cars with money borrowed against the equity of homes with inflated values.
But since the recovery — here and elsewhere — the panelists agreed, it is the end users, the collectors, who are buying cars, and primarily with their own money, money they can afford to spend.
“Now,” said Williams, “everyone is paying the current market value.”
The increases in car values are the result of true market influences — supply and demand. The supply of cars remains finite while the demand increases as the expansion of auction schedules, and televised coverage not only of those events but of other collector-car programming, brings more people into the market. And people from around the globe.
“A lot of people from Europe and South Korea and other parts of the world want in,” said Ken Lingenfelter, a long-time collectors and performance-parts manufacturer.
A question from the audience asked about the recent sale of some major collections, and whether those collectors were getting out while the getting is good.
“I’ve been in this my whole life,” Williams said. “There are changes of generations, but there are always new people coming in (and buying).”
Carini noted a big microcar collection sold in 2013 by Bruce Weiner, and explained that Weiner fills his building with cars, and when it’s full, he sells those cars and starts a new collection.
Carey noted that Ron Pratte is selling his huge car collection this week at Barrett-Jackson, where 110 of Pratte’s cars and other vehicles brought in $13.272 million on Tuesday, with the best of his cars still to cross the block Saturday.
Carey said he was able to compare what Pratte paid for 60 of the cars sold Tuesday, some of them cars for which people thought Pratte had overpaid. And maybe he did, but when they sold Tuesday, it was for 22 percent ($1.85 million) more than Pratte had paid.
Williams noted that people point to the six Arizona auctions as a barometer for the year ahead. However, he said, they really are an indicator to the public of where the market has been for the past year. Auction sales represent only the tip of the classic car marketplace iceberg, and most sales — especially of high-cost cars — take place in what are called private treaty sales reported perhaps to the buyer’s and seller’s accountants, lawyers and insurance companies, but not to anyone else.