Collector Car Values and the Stock Market: Perspectives on the Street

The stock market is strong, but is that good or bad for collector car values?

by | May 10, 2019 | Value Proposition

Photo: Johnny Miles

Collector Car Values and the Stock Market: Perspectives on the Street

The stock market is strong, but is that good or bad for collector car values?

by | May 10, 2019 | Value Proposition

Photo: Johnny Miles

The private sale in 2018 of a Ferrari 250 GTO to David MacNeil, a car-accessories titan, fetched between $70 million and $80 million (reports vary). Any price in that range pegged the GTO — one of only 39 built between 1963 and 1965 — as the world’s most expensive car. It has classic-car enthusiasts wondering just where the collectible car market is headed.

With the Dow Jones Industrial Average at just over 26,400 recently after plunging to 6,443 in March 2009 — and the latest tax cuts helping upper-income individuals — conventional wisdom suggests we’ll see more eight-figure deals. But not necessarily. Cars, like stocks, are an asset, and sometimes the two compete for capital as investors seek to maximize returns.

“Modern Classics” like these cars depicted in a recent RM Sotheby’s auction are among current collectors’ favorites. Photo: Johnny Miles

“I’ve found that there’s an inverse relationship between the stock market and the value of collector cars,” said Mark Hyman, owner of Hyman Ltd., a classic car dealership in St. Louis. “And there’s two reasons. One is that when the stock market is performing really, really well, there tends to be a flow of capital toward the stock market because people want to invest in the stock market. When the stock market tends to be flatter or not performing, people tend to look for alternative investments, and that means collectibles.”

“The other part of that is, there’s certain people who really don’t care,” Hyman said. “There’s a lot of us who love cars, and regardless of the value of them, that’s where our love is, and that’s where we put our money.”

Bonhams’ Group Motoring Director Rupert Banner noted that the collector car market cooled even as the stock market was enjoying a run-up. Photo: Johnny Miles

Rupert Banner, the Bonhams auction house’s Group Motoring Director, said that in 2018, Wall Street and tax cuts did not affect auction prices. The collector-car market peaked in 2013 and 2014, he said just before wielding the gavel at last year’s Greenwich, Connecticut, auction, adding: ”It was pretty stagnant in 2015. Since 2015, it’s been stagnant and in some regards has cooled.”

When asked what brought the auction market to that peak, Banner said: “I would attribute it to consistent set of circumstances: a president who was in the White House for getting on eight years. Some consistencies that people were used to.”

Turnout at the recent auctions surrounding the Amelia Island Concours were robust. Photo: Deremer Studios LLC – 2019 Amelia Island Concours d’Elegance

“And I saw the market creep up generally from as early as 1995, with very few actual dips in the period all the way up from 1995 to 2012,” Banner said. “And in 2012, the journalists and everyone started to write about how clever it was to own motorcars, and how there had been a climb in that period and there had been various people who had made significant percentages.” By 2013, he said, people were buying cars solely “as an asset class.”

“When they were getting great returns in 2013 and 2014, it seemed like a fantastic thing,” Banner said. As soon as they aren’t getting the return that they had hoped for, and as soon as the stock market is strong again, he said, “they just sort of swing the balance in favor of other opportunities.”

 

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Leslie Keno, who, with his twin brother, Leigh, has led symposiums at The Revs Institute in Naples, Florida, said that he would “rather not tie in the stock market with buying cars.”

“Right now, cars are in a whole leveling-off period, except for the very top lots, like the Ferraris,” said Keno, who, because of his many appearances on “Antiques Roadshow” appraising furniture, may be less known to the general public as the car enthusiast and amateur racer that he is. “There are some lots that are making headlines. The middle market is leveling off. It may be a great time to buy.”

Ferraris, and especially renowned racing versions, continue to hold or increase in value. Photo: Johnny Miles

Wayne Carini, the star of “Chasing Classic Cars,” agreed. “The minute the stock market grows again and people have confidence, I think automobiles calm down a little bit, too,” Carini said. “Because people say, ‘Okay, I can make a really good investment. Just put my money in the stock market with my broker.’”

But Carini, who owns F40 Motorsports, a collector-car dealership in Portland, Connecticut, said a strong stock market does helps collector car prices.

“Well, I certainly think that it gives people confidence that they have a little more expendable income,” he said. “And most people who are buying at auction or anywhere don’t have to borrow the money. Yet they want to know that they’re safe, so if they take a million dollars out of their portfolio to buy a car, that it’s a safe purchase. They know that the car’s value is going to be there if they have to sell it someday.”

Mark Hyman, owner of a classic car dealership in St. Louis, says the market has settled down after a huge run-up earlier in the decade. Photo: Johnny Miles

There was general agreement that the collector car market is in a state of equilibrium right now, with a balance between enthusiasts’ and investors’ dollars. “Prices actually skyrocketed a few years ago, and they’ve actually calmed down to realistic prices now,” Carini said, “so they’re still high, but they’re not outrageous.”

Hyman also cited a car market that now has returned to a balance after a “huge run-up in values” from 2000 to 2014. “Today, I think that really, really, really important automobiles are continuing to increase in value, so there’s some great appreciation there,” he said. “Cars that are unimportant are down. But I think there’s a good equilibrium. I like where we are today, because if you were to ask me what a car’s worth, today I know. In 2012 and 2013, I didn’t know. Because it kept on going up and up and up. So I like a market that’s rational. I like a market that is something that I can understand.”

Banner said the balance has swung to enthusiasts, more so than speculators. “It’s much more driven by people who want to own and use their cars,” Banner said. “We’re standing in a tent on a concours field where there are going to be in the course of two days over 250 cars shown by people who like showing them, who like driving them, who like using them. And the byproduct was that they might have increased in value, rather than the necessity being that they increased in value.”

Many experts say passion not speculation is driving prices currently. Photo: Deremer Studios LLC – 2019 Amelia Island Concours d’Elegance

Keno believes that passion — not a financial graph — is the only fuel that gives collector cars their true power. “I believe that cars are moving sculpture,” he said, “where they are a form of expression that involves all of the human senses. Discretionary buyers, when they have some extra money, where else can you get that experience? Your sense of smell, your body sensations.”

There may be more precise ways to chart the direction of collector-car prices. A number of indexes have arisen in recent years, measuring the movement of car prices through records of sales. One of these, the K500 Classic Cars Index, says that it tracks the prices for a group of 500 individual cars through thousands of sales. Perhaps it’s no surprise that the two categories of cars showing the greatest price appreciation in the K500 since 1995 are Ferraris built from 1958 to 1973, and pre-1958 Ferraris. The cars showing the weakest price appreciation are — in what may be a case of a category defining its own performance — “affordable classics.”

This Ferrari 250 GTO was purchased by WeatherTech’s David MacNeil last year for $70 million. Photo: Johnny Miles

But maybe, after all the shouting — of bids or otherwise — the simplest way to make sense of collector car prices is to use an adage from the auction world. For the purposes of this discussion, let’s pretend that the floor-mat king’s Ferrari was on the auction block:

“Why is any car worth $70 million?” you might ask.

Simple: Because someone else thought it was worth $69 million.

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