Maybe you’ve heard it before, “Wow! I had no idea it was worth that much!”. This is an all to common phrase when standing in front of a collector car with an unsuspecting non-car person. Sometimes we grapple with ourselves, trying to muster up an answer with proper justification as to why a car […]
Maybe you’ve heard it before, “Wow! I had no idea it was worth that much!”. This is an all to common phrase when standing in front of a collector car with an unsuspecting non-car person. Sometimes we grapple with ourselves, trying to muster up an answer with proper justification as to why a car that was worth $25,000 two years ago is now worth $150,000. Since the 2008 recession, collector cars have only gained in value; is this a bubble waiting to burst or is it a sustainable market with the current pricing across the board? Considering this, an excellent question to ask is which cars should you keep, and which cars have succumbed to market maturity, justifying a sale?
Many magazines, “experts,” collectors, dealers, and the like have tried to answer the question of the sustainability of the market. Without trying to beat a dead horse, we believe there are a few simple answers as to why the market has reached new heights. Reason one is that cars, much like fine art, can be an alternative and tangible asset in addition to conventional investing. Due to increased media exposure, many people with the necessary disposable income who may normally buy a fine art piece may now find themselves purchasing a collector car instead. Their decision is influenced by a number of factors including but not limited to more usability of their investment, a greater “cool factor” and the shear tangibility of the automobile over many conventional investment types. We can all thank the Velocity Channel’s coverage of Barrett Jackson, the numerous high profile auctions that have sprung up, and the increased number of concours events throughout the world for a big part of these value hikes. People are able to see these rapid gains and think why make 6% on my investments in a stock portfolio when I can take a portion of these funds and buy a collector car(s) and make 30-40%.
In the current market, buyers are making purchases in cash rather than a form of borrowing providing for a stable market that does not heavily rely upon external conventional markets. One major flaw of the booming muscle car market of the early 2000’s was the fact that many buyers used home equity lines of credit to fund risky high dollar purchases of cars in which thousands were produced with only a few minor option sets delineating value swings of massive amounts. When the housing market went bust, so did the muscle car market. Only now are we seeing slow increases to pre-recession prices in this American car market with less buyers utilizing financing. However, it is concerning to see “estimated monthly payment” rise in correlation below the bid counter at a Barrett Jackson Auction. Hopefully history does not repeat itself.
All of the above text was composed prior to the events that unfolded during the 2016 Scottsdale Auctions. Now that both the Scottsdale and Amelia Island auctions have passed, it is interesting to compare the current market as it relates to the bull market of 2015. Many marques as a whole have experienced price stagnation and even worse, price decreases in specific models. It is primarily the makes and models that have skyrocketed, perhaps too fast too soon, such as pre-1973 Porsche 911’s. Should a 911T be worth $20,000 to $35,000 as they were 5 years ago? In our opinion the answer is no. Simply put, they are too much car for the money, which is why they have seen such substantial gains. But at the same time, should a restored 1971 Porsche 911S Coupe be worth $250,000-$270,000? We think not. For a car that is virtually a slightly modified 911T that gives the driver a similar experience but costs $100,000+ more than a standard 911T, the price disparity does not make sense. In terms of collectability, the 911S certainly dominates over the standard 911T but should correlate to price within reason and astute collectors have started to recognize this. Now would be a good time to sell early 911’s before we experience any further decreases in value.
Along with early 911’s, below is a list of cars we suggest selling if capturing value was a motivating factor. These suggestions are based upon rarity of the car, driving characteristics as it relates to value, current market conditions and external factors that abstractly affect the car market:
-Mercedes-Benz 190SL- These are a must sell. Mercedes produced almost 26,000 of these 4 cylinder, “baby 300SL’s” and the shear volume of production is not conducive to the high water mark of these cars which was about $350,000 for the best restored example a year ago. As 300SL prices went through the roof, the 190SL followed suet. Many buyers were non-car people who did not understand quality, relying on auction estimates and price guides for false guidance. Though they are aesthetically pleasing cars, they are underpowered and can be a mundane drive. As with early 911’s, these have gone up too fast, too soon. It is about time these corrected to a more appropriate price of between $90,000-$130,000 for excellent drivers and restored cars, respectively.
-Porsche 993 Turbo- They are readily available in the current market for about $150,000 with around 35,000 miles. Over the past two years, we have seen these climb to staggering heights. $250,000 for a sub 10,000 mile example; a car that 5 years ago was worth $70,000 and are not exactly rare with approximately 5,900 built. The 993 Turbo is a pleasure to drive with 402hp under your right foot, which we attribute to their price gains, not to mention they are the last of the air-cooled turbo charged Porsches. Prices have decreased to a more appropriate level in the current market and have leveled off so owners can continue to enjoy them or sell in the current market as there are no foreseeable future gains.
-Ferrari 599 GTB 6-Speed- Just over $300,000 with options when brand new, RM Sotheby’s recently sold a Black 6-Speed in 2015 for an astounding $682,000! The buyer paid for rarity (20 6-Speeds produced for the US Market) combined with low miles. If you consider what other options a buyer has for $682,000, there is a laundry list of cars we would rather own before a 599 GTB. For example, a Bugatti EB110 that could be had for much less and to us, it presents more collectability. Furthermore, the 599 engine and chassis were constructed to complement the F1 transmission with Ferrari anticipating the majority of buyers ticking the box for the $11,000 transmission option. In turn, some gated 6-Speed 599 owners have had issues with the gearbox with respect to performance nuances. Price hikes can also be attributed to Ferrari’s announcement of ceasing three pedal, stick shift cars. Personally, I think this is another great Ferrari marketing ploy for an eventual reintroduction of a limited production, special supercar fitted with a manual gearbox but this is just a theory.
-Jaguar E-Type Series I Roadster- Another case of rapid appreciation of unfathomable amounts. A few extremely high auction results for early flat-floor, side latch cars supplemented with ensuing dealer pricing inflation caused these to flourish. With around 17,000 Series I Roadsters produced, it is difficult to comprehend the sustainability of average prices between $200,000 and $250,000 for excellent drivers with some 100 point cars achieving nearly half a million dollars. Now would be a great time to capture these high prices and apply the proceeds to other interesting cars with growth potential.
There are still a few subtle trends that have yet to be denuded by auction houses, mainstream media, and dealers with the acumen to speculate. Stay tuned for part II when we will continue these esoteric conversations about car valuations and market nuances. But for now, get out and enjoy your cars! Follow us on Instagram and Facebook @LBILimited for up-to-date LBI happenings, acquisitions, and events!
Written by Adolfo Massari