Are collectable cars collecting dust?
Collector car prices are put to the test in August & September every year as auctions on both sides of the Atlantic unload classics & modern collectables. So how healthy is the market in 2018?
We have had no shortage of impressive sales in 2018 with RM Sothebys achieving the highest price ever paid for a car at auction with Ferrari 250 GTO #3413 GT selling for $48,405,000 In Monterey in August with another GTO reputedly changing hands privately for $70 million in June. The very best classics are still highly desirable and edging up in value.
The Monterey Auctions are the bellwether for the global collector car market. This year (2018) the big three auction houses (RM Sothebys, Bonhams and Gooding & Co) sold just under $310,000,000 of cars (including premium), which was a marked improvement on 2017’s $280,000,000. Great news you might think, but they also offered 20% more cars in 2018, and just four lots accounted for $100,000,000 of that…. The average sale price was down 7%, with more cars being offered with no reserve.
A lot of cars were sold (82%) which goes to show that at the right price there are plenty of buyers out there, just not at 2015-2016 prices. The best of the collectables, such as the 250 GTO are still highly desirable and keep driving that market forward.
A rising tide lifts all boats?
It’s a phrase that has been used regularly to describe the gains we have seen in the collectable car market – but is it true? Fast forward from Monterey to RM Sotheby’s London Auction on the 5th September where just 50% of the cars found new homes. Amongst those remaining for sale are a number of modern collectable supercars including a Porsche 918 spider, Aston Martin Vanquish Zagato Volante, 70th Anniversary Ferrari F12 and 488 and a RHD Ferrari 599 GTO amongst others.
Plenty of desirable cars didn’t find a home at the sums their owners were hoping for, which we believe points to an unwillingness of owners to price their car to the market rather than a significant downturn in values.
It’s all about timing.
If you didn’t already know, one of the UK and the world’s preeminent classic car dealers has found itself in a bit of hot water recently. JD Classics, who previously ran Jaguar’s Heritage racing program on their behalf, has reportedly been put up for sale in a bid to return value to its stakeholders according to Sky News. JD Classics founder Derek Hood was found by a judge to have engaged in “deliberate and dishonest conduct” in dealings with a customer who bought and sold millions of pounds worth of classic through JD Classics. Charme Capital Partners acquired a majority stake in JD Classics in 2016 for an undisclosed sum. Sky News claims that stakeholders could face a loss of up to £25m.
Why is this relevant?
Some of JD Classics’ stock will be offered at the 2018 Goodwood Revival auction, and this will no doubt make many owners reassess the values of their classic vehicles – if the story gets out. The classic car press has so far remained tight-lipped, but if the advertising revenues dry up it may become a subject they wish to tackle in the consumer’s interest. When it looks like the world’s leading classic Jaguar dealer might have been misleading customers, it will undoubtedly cast a spotlight on the true investment value of classics.
Bonhams managed a respectable 61% sell-through rate at the Revival auction, but this is a long way from the 80%+ sell-through rates of 2014-2016 and much more like the percentages one might have expected back in 2011/ 2012 or even earlier. Of the modern hypercars available, the expensive-looking La Ferrari, La Ferrari Aperta and Bugatti Veyron Super Sport failed to sell and this neatly sums up the market at the moment – plenty of buyers and plenty of cars for sale, but all too often at the wrong price.
Collectable cars have been the best performing “passion asset” over the last decade, but the growth we saw from 2009 – 2016 has slowed dramatically and in some cases reversed.
Modern collectable cars – such as the Porsche 911 R, Ferrari 458 Speciale, and McLaren Senna – are a more volatile short-term asset than classics and premiums are proving to be slimmer and shorter-lived than in previous years, particularly as manufacturers step up their efforts to control speculation on their latest models.
That won’t prevent first echelon buyers from putting down deposits on the latest cars from Porsche, Ferrari and McLaren but it should make the second owners think twice about how much of a premium they are willing to pay and if they buy using finance, what their exit strategy is. There are still plenty of buyers and interest and confidence in the market appears strong – just at what price? Premiums have spiralled out of control in many cases, the McLaren Senna being a good example of a car that was apparently sold out with huge premiums attached, but build slots are now available with a 30% or less premium. Compare that to the 300%+ markup on a 911 R….
Classic and collectable cars continue to offer the potential for a tax-efficient return on a car purchase. No buyer should consider that every classic is an investment, though, just as not every supercar with a waiting list will make you an instant profit. Good opportunities in this marketplace are getting scarcer and more difficult to identify unless you are lucky enough to be able to buy the rarest and most collectable classics or to have an early build slot for a limited production supercar(s). Realistically, these are likely to be the same people!
Anyone selling in this sector will always point to the potential upside, the possible gains and at the very least the stability of the value of the asset – one of the reasons many collectable cars are now gathering dust as recent owners are unable to realise the hoped-for gains or even the original purchase price of their “investment”. At this level you need to be in and out lightning fast or play the long game, as those with the skill and timing to achieve this will undoubtedly report.
We’ll leave you with this thought. Consider whether you think the new McLaren Speedtail really is worth 6x the list price new, based on this prediction by hypercar brokers Knight International….. (NB: Magnitude Finance have no affiliation with Knight International).
Magnitude Finance are committed to treating customers fairly. If you want advice on the best finance package to choose or the true market value of a vehicle, please get in touch.