In an article by Telegraph in the UK it is reported that people are looking toward classic cars as investments during the current economic recession. This is an interesting turn of events, as historically we have seen prices drop during times of economic hardship. In the past, collector cars have typically been viewed as luxury items by most. It is possible that modern media outlets such as internet forums, televised car auctions and others have broadened the appeal of classic cars and shown how stable their values remain compared to traditional investment schemes. The following is a reprint of the Telegraph article, as found on this page.
Numbers of people interested in acquiring these old vehicles are increasing, according to insurance company Hagerty International.
It said there has been "robust trading" at classic car and collectors' auctions of late.
Hagerty's managing director Angus Forsyth said: "A well-sourced, classic and collector car can accrue in value rather than depreciate, as is profoundly the case with new cars.
"In the current climate, buying a classic car wisely can represent a good investment.
"As a consequence, we are seeing increasing interest in ownership amongst private motorists looking to join the 'hobbyist' movement, which currently constitutes some two million owners in the UK."
To those interested in exploring classic car ownership, Mr Hagerty said: "There are both opportunities and heartaches, which is all the more reason to carefully research and verify the information on a car you have your eye on, and buy one that you love and would be happy to keep for a period of time."
Interesting article. I too expected the value of our classic cars to fall significantly. Must be the global appeal, limited availability and ease of marketability (trade and transport) to those that are not truly harmed by a poor financial market. I would still expect that prices are soft. I guess a good investment is one that only loses 20% vs 40%.
Next thing you will know, the financial wizards will be selling derivative investment shares, to churches in Oslo, in my non-running fleet of British investments vehicles.
For me, I would rather roll back to the original value of my 401K, and lose a few dollars on the perceived value of our hobby cars.
Last edited by HealeyBN7 on Tue Mar 03, 2009 9:22 pm, edited 1 time in total.
I think it's still a good time to buy. Prices are always down in Winter, and there are a lot of cars on the market due to people falling on hard times. With so many cars available, prices have to be competitive. It's kind of a less scary version of the housing market. The article makes sense to me though, because I've noticed that prices haven't dropped a lot compared to the norm for this type of year. The market I watch most is MGs (obviously), and I'd have to guess that while prices are lower than average, they're still higher than last Winter.
Dean makes a valid point about existing investments versus car value. But it's still nice to know that in a worst case scenario, I have something of value to sell. Hopefully the economy will come back up to where it was, and car values will remain stable. I don't want to see them go TOO high or the only people buying classic cars will be the type who won't drive them to work. I hate that.
I'm very confident that we will still see prices, especially of the most expensive collector cars, drop significantly. In the past, plummets in collector car values have trailed the general economy by 2-3 years, so I expect that to happen again.
Take a second look at the economic recession of the late 80's. You'll notice that collector car prices didn't hit bottom until the early nineties. Tracking Ferrari prices alone, compared to the economy, will reveal this trend. I can't totally explain why it happens this way, but I think in 1-2 years we can expect to see auction headliners at low prices that would shock us today.
Perhaps people are moving into the collect car market now, since it seems to be fairing better than most securities, but they will jump right back out once it looks like the stock and credit markets are all patched up. Perhaps this is what will cause the decline.
-John M.
'67 Volvo 1800S - Sold
'86 Mercedes 190E 2.3-16 - Daily Driver
caliwagon wrote:Perhaps people are moving into the collect car market now, since it seems to be fairing better than most securities...
You've probably got something there. Us car nuts continue to push on with our hobby even when times get tough, so it makes sense that the classic car market might do better against recession at first... at least until times get really tough and we come to our senses! I remember the huge drop in collector car values in the early 90's, but I always attributed that to logic and reason, like what is finally happening with muscle cars today. Collector cars as a whole went sky high in the 80's, perhaps because it was the beginning of the "modern age" of classic car collecting. After a while the novelty wore off and the market flooded with cars for sale at hugely inflated prices. With so many cars on the market it was difficult to sell, and prices dropped. Supply and demand, I suppose. Recession could certainly play a part in that as well.
Yes, there were lots of factors in that early 90's plummet, but many that are common to what we're seeing now. Collector car prices certainly do seem to be inflated at present. Once this recession has completed its toll, even less people will be able to afford them. There simply will be no one left to buy Ferraris and Hemi 'Cudas, and it will come down. The prices we've seen in the last year or two barely seem sustainable in a normal market (kind of like Socal home prices!), let alone post-recession. Still, though, it will take time for this to all materialize. Just don't buy that GT350 or Gullwing you've been saving for now! Honestly, I won't be surprised if some of those prices are halved by 2011.
-John M.
'67 Volvo 1800S - Sold
'86 Mercedes 190E 2.3-16 - Daily Driver
I've already noticed muscle cars that people paid $1M for a couple years ago being worth a fraction of that now. I knew it would happen and predicted these people, who I lovingly call crazy idiots, would lose a ton of money on those cars. They probably knew it would happen too, but are so rich that I doubt they cared. For this reason I only feel a little rotten giggling behind the scenes.
yeah, I really don't get the paying 1 million or more for a car that retailed for 2k or 3k new. I mean yes there is some appreciation in these classics that are well maintained and as there are less of these machines they become more valuable. But not in the million range valuable.
spitfire wrote:yeah, I really don't get the paying 1 million or more for a car that retailed for 2k or 3k new.
If things get really nasty, you have to wonder where the real bottom of the market could be. One could argue that it would be no better than the rate of inflation. Using the US Retail Price Inflation data from 1959 to 2009, your $3,000 car is inflated to $22,339.93 in today's dollars. You could probably argue the there is 40 years of carrying cost (care and feeding, maintenance, etc) that is missing, but that is one heck of a gap to get to $1M.
If you really want to live on the edge, pour a stiff drink and go ahead and plug in the original cost for your home. Ours was built in '59 for approx $22K.
