New records everywhere
For the past decade, we have watched the collector-car market slowly edge upward. Our cover in November of 2003 proudly proclaimed, “270 Cars Sell, $24m Total.” Both numbers are smaller than what the third-largest auction of this year’s weekend, Mecum, achieved by itself.
By now the overall totals are familiar: six auctions, 786 cars sold, $258m in total sales. Forty-eight (yes, 48!) cars over $1m. Shattered world records littering the auction grounds.
In July, I predicted that the final totals would be up more than 20% from 2011, going from $198m to $220m. Most thought I was being Mary-Poppins-esque optimistic, given the stagnant economy. The final number was almost $40m above my estimate. I’ve noticed that when my predictions underestimate the final outcome, no one calls for my analyst head.
Why?
There are a variety of reasons for this surge. Alternative forms of investment continue to be shaky — would you rather have invested $12m in 316,000 share of Facebook at $38 each, or in one 1936 Mercedes-Benz Special Roadster? Even to non-car collectors, the continued growth of the collector-car market, even taking account of the downturn in 2009, is enticing.
Having outsiders jump in when things get hot is not unusual — the same pattern holds true in real estate, jewelry and fine art. I’ve been to several seminars on investing in the past year, and the most common theme in presentations is, “I don’t know where you should put your money.”
The propagation of investment funds for cars is a sign that it’s not only long-term collectors who are stepping up. Investors with liquid assets, aka money, like to have those assets working for them, earning a return. If they happen to actually like the cars they are buying, so much the better.
Our sense was that bidders came to Monterey with their bear rifles loaded and triggers cocked. They weren’t going home empty-handed.
The very public purchase of GTO s/n 3505GT for $35m by SCMer Craig McCaw in May of this year helped buoy market confidence. In fact, the auction companies owe Mr. McCaw a spiff just for making it easier for someone to spend a mere $5m or $10m on a car.
The auction companies played to this, as they should, by offering the best selection of collector cars, in all price ranges, ever seen anywhere. If you wanted a Porsche 917, a Ford GT (classic or homage), a Ferrari TdF, a Mercedes 540K, a Mercedes 300SL Gullwing or a Ferrari Daytona, you could find one in Monterey.
And all you had to do was wave your pinky enough times and the car would be yours.
There was also a sense that as collectors age, they are thinning their collections, and cars were coming to market that hadn’t been seen for years. The fear is, of course, that if you don’t snap it up this time around, when will you get your next chance?
Buying a million-dollar car in Monterey didn’t mark you as a risk-taker; instead, it proclaimed you were a prudent investor who was in sync with the market.
Don’t worry, be happy
The market today doesn’t scare me like it did in 1989. While the prices paid were a magnitude higher than might be achieved in a non-Monterey auction setting, they all made sense relative to one another. If a ’56 Speedster is worth $286k, then isn’t a Toyota 2000 GT worth $627k? Paying $396k for a 1934 Cadillac V16 seems reasonable enough when the transaction is put next to a 1928 Bentley 4½ Litre at $6m.
There were outliers, of course — the most commonly noted being the 246 GTS with “chairs and flares” that brought an otherworldly $468k. But that sale didn’t cause every other Dino to double in price, and we should just be happy for the seller. Surely he smiled all the way to the bank, the beneficiary of the bountiful red mist in the room.
I predict we will see a continuation of blue-chip collectibles bringing blue-chip prices. All nice Gullwings will soon be million-dollar cars. Ferrari SWBs, the most undervalued of all Enzo-era super-Ferraris, will cost $10m.
But the market isn’t exploding at all levels. Tidy MGAs won’t get to $100,000, they’ll stay in the $30,000 range. Common cars that are easily available in restored form will percolate along just as they did before Monterey, slowly going up slightly behind the cost of a restoration. This isn’t a rising-tide-lifts-all-prices market, it’s about the 1%. Perhaps we’ll see Occupy Monterey signs next year.
Timing
Is it a good time to buy or sell? For a collector of means, that is never a simple question. Collectors tend to sell a big car because they’ve had it long enough, done the tours and concours — and turning the car into cash will open up options, be it other cars, real estate, a jet or art. So if you’ve got significant cars and want to turn them into money with which to do something else, yes, this is a good time. Should you wait and see if the market gets another 25% higher? We all know that trying to time the market is a fool’s mission, and as my great friend and Harley-Davidson and Bentley fanatic Barry Cooney once told me, “You never go broke taking a profit.”
Should you be buying now? If you’re tired of watching your money earn 5% at best, if you’ve got a spare $10m–$50m that is underperforming, why not? Buying a Ferrari 250 Cal Spyder will get you into a new club, and will give you a chance to go to exotic-car shows in interesting places. Barring global catastrophe, I don’t foresee a general collapse of the market à la 1990–91. There just isn’t the number of second-tier cars having their values overinflated, and those are the first cars to crash.
Chester tells me that waves come in sets, and an experienced surfer can spot — from far away — the one that will give him the best ride. That’s your challenge now — look at the results of Monterey, pick the car that is riding the wave that looks best to you, paddle to position yourself, and when the dark, glossy peak of the wave arrives, pop up and enjoy the ride. ♦