International classic car auctions have a lot in common with F1. They are highly visible, heavily hyped by the media, involve a lot of money and both have a really long season – and after a brief winter hiatus the auction world’s big guns have been back in action in the US and Europe.
The Arizona auctions represent the start of the international auction year with the Paris sales less than a week later and it wouldn’t be an understatement to say that many people have been waiting with baited breath to see which way the classic car market is going to go in 2016 – and now the results are in.
There were nearly 15% more cars for sale in Scottsdale this year. There are a very large number of high-value classics available for sale in the market right now and it was inevitable that sooner or later the very best stock would begin to dwindle while more and more owners decided to cash in their classics while the going was good – regardless of condition. Things simply couldn’t keep going up and at the 2016 Arizona auctions 6% more cars were sold than the previous year for nearly 15% less which is the statistic that the media have been talking about. What they haven’t mentioned is that the line-up in 2015 was stronger – so are we comparing apples with apples? The feedback we have received is that buyers were being a bit more canny than in previous years but if you care to check the story is much the same as it was in 2015….
*Figures provided are for Bonhams, RM Sotheby’s and Gooding & Co
An almost identical value of cars sold in Paris in 2016 as it did in 2015 but a lot more cars went unsold this year with a noticeable reduction in sell through rates and many cars selling below estimate (like the previous year). By and large the selection available wasn’t as enticing as the year before bar the obvious exceptions but there is no doubt that the Paris auctions weren’t quite the same as last year.
“The market speaks”
This is a phrase we have heard before and most recently adopted by Classic Driver to announce the arrival of “austerity” in the classic car world in 2016. Other classic car media outlets are cautiously reporting a slow down in the market. We think they are wrong.
The mainstream and financial media are still a couple (at best) of steps behind the pace with Bloomberg recently encouraging buyers to invest in classic Porsche – one of the areas many pundits now believe has become overheated – and there is an over-abundance of classic car investment advice available that ignores the current market reality.
The tip of the iceberg
There is good news – auction prices (which are what most journalists and content producers rely on) are just the tip of the iceberg. Around 85% of all classic car sales transactions in the UK in 2016 were made outside the classic car auctions and we can tell you that business is still brisk in that sector – as it is at the auction houses. The media focus on the relatively small and nuanced area of the market that are auction sales means that what lies beneath the water is generally ignored (because the data simply isn’t readily available) and in the UK at least confidence remains high in the classic car industry. As many dealers will tell you, most of the finest classic and collector cars never even make it onto the open market. The most expensive car ever sold (allegedly) – a Ferrari 250 GTO – was sold privately for a great deal more than a similar car achieved at auction.
2+2=10. Price does not necessarily equal value.
Over the last 12 months we have seen prices for some models soar at the same time as the numbers of cars available have increased exponentially as owners consider selling their cars but only for a price that would make them very happy. How are they valuing their cars? By looking at the very highest prices paid at auction and then adding some – 2+2=10. Are they all experts and qualified to make these valuations? No. Are they holding dealers and auctions to ransom over the consignment of these cars? In many cases, yes.
We have heard a lot of talk about external factors that could influence the classic car market. In general terms these are:
The economy and global financial markets
We are often asked how these might affect the classic car market in the short term. Interest rates don’t look set to rise dramatically any time soon and it is worth remembering that the collapse of the global economy was one of the triggers for the rise in classic car values. If anything we see a rise in oil prices having a positive effect on the market. What legislative changes for environmental and taxational purposes might be made and when is anyone’s guess.
Rather like the credit crunch, we see the media as a threat to confidence in the sector as many continue to focus on creating headlines rather than well-informed and considered journalism. Don’t believe everything you read.
The market reality
12 months ago we predicted that prices for many cars would plateau in 2015 and from our perspective this has proved to be the case. The deals that are being done below the watermark of the classic car iceberg have not necessarily matched the towering heights of some of the high visibility sales but while the tip of the iceberg may now be showing a few cracks the rest remains solid and stable. Many buyers have been able to secure great cars in the last 12 months for sensible prices while highly-priced, lower-quality cars remain in stock.
From our perspective dealer confidence is currently high and this is mainly being driven by strong sales in December and January. Returning to the F1 analogy, there is a lot of activity going on in the background with significant investment regardless of what spectators see from the comfort of their living rooms.
Buyer confidence & activity remains high
Most importantly, buyer confidence remains high. We have seen a record number of enquiries over the past two months and whilst speculators have largely left the market amongst enthusiasts the appetite to buy cars remains strong and appears to be growing.
Too much focus has been placed on price and investment potential over the last 18 months. Regardless of value, most enthusiasts still want to own and enjoy classics and the hobby has grown enormously in the last few years.
Should I be buying?
It looks like there will be a lot of choice out there in 2016. Buyers will be focused on the best cars and those vehicles will retain or grow in value. Sellers that were asking too much for their cars will have to reconsider the asking price or decide to keep and enjoy them. The auctions look like an exciting place to be bidding this year and sellers will be keen to deal.
With thanks to Hagerty International for their auction data graphs
Iceberg image by Uwe Kils – additional images courtesy of Bonhams & Oldtimerweb.nl