The collector car equivalent of Chicken Little is wrong. The sky isn’t falling. We haven’t rolled back the clock to the era of the gold-chain speculators. A bubble hasn’t burst. It is not time to panic.
Says who? Says McKeel Hagerty, that’s who, and as the largest insurer of classic and collector vehicles, Hagerty monitors the pulse of the hobby as closely as anyone.
First of all, says Hagerty, stop and take a breath.
“Compared to four years ago, things are still phenomenal.”
Ah, how soon we forget, but remember how there was a recession from which not only the classic car marketplace but every aspect of the economy was just starting to recuperate.
Hagerty points out that when the classic car market began to recover, it was led by the top end, “and middle and entry level started moving up later.”
Now, he suggests, the same thing is happening. Due to various economic forces, “the top end is sluggish but the middle and entry level are pretty good.”
He offered an example: In Arizona, a Ferrari 288 GTO or two didn’t sell but Ferrari 308s were going for premium prices, albeit a lot less than a very similar-looking 288 GTO might be worth.
“The big money is sitting it out,” is how Hagerty put it.
However, there is an exception. When what Hagerty called “the Mona Lisa cars,” landmark vehicles that haven’t been available for decades finally are offered up for sale, for example, the 1936 Mercedes-Benz 540K Special Roadster at RM Sotheby’s Arizona auction the wealthy buyers are responding. The beautiful Benz Sinclaire 540K sold last week for $9.9 million, the most ever paid at any collector car in Arizona.
Yes, that $9.9 million figure was $100,000 less than the car’s low pre-auction estimated value, but only by a mere 1 percent.
Speaking of 1 percent, the 1 percenters are, indeed, being cautious these days with their money. You don’t become a multi-millionaire or even a billionaire by doing foolish things with your money. But you do pay attention to the economy — at home and globally — and adjust your spending accordingly. And sometimes, Hagerty said, that decision is to “sit it out” until some stability is re-established. Hagerty spoke Saturday evening with Classic Car News; Sunday, The New York Times published a review of Satyajit Das’ new book The Age of Stagnation.
Nonetheless, “The U.S. economy still is really strong,” Hagerty said. But, he added, that isn’t the case everywhere. He offered this anecdotal evidence: The head of his company’s British office flies over for the Arizona auctions on the same flight each year and that flight usually is full of familiar people who spend their time on the plane studying the auction catalogs and talking with others about the cars they’re eager to see.
This year, Hagerty said, the head of his British office saw no auction catalogs being studied and didn’t recognize a single person on the airplane.
Hagerty offered another observation that illustrates what’s happening at the top end of the market: He said that with the run up in prices over the past couple of years, several of his company’s clients have chosen to sell their Mercedes-Benz 300 SLs, whether gullwing coupes or soft-topped roadsters. With values peaking, they typically sold those cars for $1.3 million to $1.4 million.
But here’s the illustrative kicker to that story: In every case, Hagerty said, those clients turned around and bought another car. And not just another car, but they all bought the same kind of car — an air-cooled Porsche 911. Sure, they paid maybe $300,000 for the best examples of those cars produced in the late 1960s and ‘70s, but they got cars they can enjoy driving anywhere and anytime, including on vintage road rallies, and in the process they were able to put away a million dollars.
It may be because of that behavior that many Porsche owners have decided to sell their cars, producing a glut on the market. In Arizona, Bonhams offered 115 cars in its catalog, 21 of them Porsches. All of them sold, but only five sold for as much as their minimum pre-auction estimated values. Typically, the cars were selling for 25 or 30 percent off their estimated value. And it wasn’t just at Bonhams that was happening.
Hmmm. Comedian Jerry Seinfeld is offering up 18 of his Porsche’s at Gooding & Company’s auction in March on Amelia Island. You have to wonder if he’s having second thoughts.
But while the top end of the market may have softened, the middle and entry level have strengthened, or perhaps they just have yet to catch up with what’s taking place at the top.
Mecum’s recent auction in Kissimmee, Florida, exceeded $100 million in sales and so did Barrett-Jackson’s Scottsdale sale. For one thing, Hagerty said, both those sales attract a lot of new buyers, especially Gen Xers. By the way, Hagerty said, he’s part of that Gen X generation.
What he sees his generation of classic car consumers seeing, he said, are “modern classics” — 1980s and newer supercars and what Hagerty has termed “moustache muscle,” the 1970s post-oil-embargo cars made famous on large and small screens by the likes of Burt Reynolds and Tom Selleck.
One more observation from Hagerty to keep in mind: While we tend to see the Arizona auctions in January as the start of the new year, he said the month actually began with the two big late-2015 sales in New York City, the inaugural Keno Brothers sale and the Driven to Disruption auction by RM Sotheby’s. And, he added, the month extends through the Retromobile sales taking place later this week in Paris.
RM Sotheby’s, Bonhams and Artcurial each has an auction in Paris. Artcurial’s includes one of those “Mona Lisa” cars, a 1957 Ferrari 335 S Spider that has a pre-auction estimated value of $30 million to $34 million.
So, did the Europeans stay home from Arizona because of the economy or because they were saving their money for Paris?
“Paris,” Hagerty said, “will be interesting.”