The car enthusiast market is cooling. Kind of.
“Sellers are showing me comparable sales from 10-16 months ago and insisting on reserve for higher prices,” wrote Doug DeMuro, auto celebrity on YouTube and founder of the auction site. Cars and Bids. “Many people, even when faced with more recent evidence of selling, simply don’t believe the market has fallen since its peak.”
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Over the past few years, it seems the dominant conversation among car enthusiasts has been the price of everything. Of course, literally everything is expensive these days, but for the purposes of this story, we’re talking mass-market enthusiast cars. The pandemic and its effects on the stock market in 2020, a shortage of chips which led to a lack of new car inventory and a growing interest in enthusiast cars, combined with various other factors which led to a price spike on a range of vehicles.
There are, however, signs that the market is cooling. At least it is in some segments. DeMuro — who is, in the spirit of full disclosure, a friend — has unique insight into that as the owner of Cars and Bids, an exclusive auction site for cars built after 1981. Earlier this month, he shared an informative thread on Twitter based on his experiences setting reserve prices for auctions on his site.
In an interview with Road & Track, DeMuro developed his thinking. “I think in times of inflation, and especially if we think it was an inflationary bubble time like me, then by definition there was overvaluation,” he said. “Things have gotten a little out of control and obviously the Federal Reserve, and the government in general, are trying to change their money supply tactics to try to make things less inflationary… But you know, I really believe these things are worth what people at the end of the day people thought they were worth it at the time but it was in a situation where everything was getting very expensive and interest rates were really low so debt was cheap.
The market is still hot for various reasons, including the limited supply of new vehicles. So while there may now be deals to be had, easing isn’t happening in all areas, and if you think now’s the time to pick up a rare, classic Ferrari for a song, I I’m sorry to say that day might never come. “We’re selling cars of a different caliber than some of these online auction houses, so we really haven’t been affected at all,” said Gord Duff, head of auctions at RM Sotheby’s. , in an interview with Road & Track.
RM Sotheby’s has seen the same huge increases as the rest of the auto market over the past two years, but Duff says its customers aren’t really affected by the same factors leading to an easing elsewhere. “We’re dealing with people of a certain kind of wealth that those things aren’t really, you know, affecting them too much on a day-to-day basis,” Duff said. “[Now, they] even more likely a reason to, you know, invest their money in, you know, very blue-chip type vehicles.”
For those looking for more accessible, yet still ambitious, enthusiast cars, the realities are very different. “What we’re seeing right now is that the markets have tightened up, especially the stock markets,” DeMuro said. “People don’t have quite as much money as they thought six months ago.”
Kyle Stock, Senior Correspondent at Bloomberg, agrees that the stock market plays an important role here. “There are always anomalies with vehicles and buyers, but I think in general the core of the market kind of follows the stock market and the economy in general,” he says. “And I think it would be really weird if it didn’t get cold right now because the COVID boost was a real thing.”
“When COVID happened, the market first stalled and then skyrocketed, so everyone looks at their portfolio and says, ‘I’m a genius! I increased by 30%! I can do whatever I want!’” DeMuro said. “Now there’s a pullback where it’s like, maybe you’re not as much as, and you don’t have quite as much money to mess around with. And so there’s just less ‘buyers or the same number of buyers, but willing to pay less money One of the two.
The catalog for the upcoming RM Sotheby’s auction in Monterey is interesting. A mix of cars you’d expect to see at a high-end auction – Duesenberg, pre-war Bugattis, Mercedes Gullwings, Ferraris from the 50s and 60s – and things that have increased in stock in recent years. There are notably a number of supercars from the 80s and 90s, and even a handful of stunning Nissan Skyline GT-Rs.
Duff thinks there’s still room for cars like the Jaguar XJ220 and other Radwood-era exotics, although interest remains strong in traditional top-notch classics. “If you look back over the last 20 years, these low-production cars, even though they’ve had declines, they’re still worth a bit more than they were 20 years ago,” he said. “When I started in the business, [Mercedes 300SL Roadsters] were $175,000, $200,000, and they went from $400 to $600,000, to $1 million, $1.5 million. They’ve come back a bit, but they’ll never come back to $500,000.”
Stock says a slowing economy could make blue chip classics more attractive to the ultra-rich as they will continue to appreciate. You see these cars, like the 1974 Dino 246 GTS “chairs and flares” that sold for $853,000 on Bring a Trailer– continues to sell strongly, and we may see more later this month at the Monterey auction.
Without much hindsight, it’s hard to say exactly when the easing started, though DeMuro thinks it was likely earlier this year with falling markets and rising interest rates. One of the first car markets noticed by the team at Cars and Bids was the new Mercedes G-Wagens, which for a time regularly sold for $100,000 off the sticker. They were easy sales for cars and offers, but over the past few months they have started to see cars failing to meet the reserve. The latest Porsche 911 models also seem to be softening. Not limited-production, hugely hyped cars like GT3s and the like, but more mainstream Carrera models. Rising gas prices have also had an effect on enthusiast SUVs in general, which were previously booming.
Although the premium car market still seems to be growing, overall things are leveling off. Hagerty’s Market Rating, which judges the classic car market based on a number of factorsfell for the first time since April 2020. The insurance agent says inflation is outstripping classic car appreciation, although values are still very high.
DeMuro recently made a video on the state of the market as he sees it, and it’s worth watching to get a better idea of what’s going on for specific models. There are still plenty of cars that continue to perform well, some surprising, like the E36 M3, and some less surprising, like the Rivian R1T.
It’s hard to know exactly where things are headed, especially with a strong possibility of a recession. What is certain is that if you know where to look, there could be a deal to be struck. When was the last time you could say that?
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