What The Heck's Going On With Vintage Automobiles?

Tyler Durden's picture

Authored by Wolf Richter via WolfStreet.com,

The fate of asset bubbles under the new regime.

Everyone is hoping that next Friday and Saturday, at Sotheby’s auction in Monterey, California, the global asset class of collector cars will finally pull out of their ugly funk that nearly matches that during the Financial Crisis. “Hope” is the right word. Because reality has already curdled. Sotheby’s brims with hope and flair:

Every August, the collector car world gathers to the Monterey Peninsula to see the magnificent roster of best-of-category and stunning rare automobiles that RM Sotheby’s has to offer. For over 30 years, it has been the pinnacle of collector car auctions and is known for setting new auction benchmarks with outstanding sales results.

This asset class of beautiful machines – ranging in price from a 1962 Ferrari 250 GTO Berlinetta that sold for $38.1 million in 2014 to classic American muscle cars that can be bought for a few thousand dollars – is in trouble.

The index for collector car prices in the August report by Hagerty, which specializes in insuring vintage automobiles, fell 1.0 point to 157.42. The index is now down 8% year-over-year, and down 15%, or 28.4 points, from its all-time high in August 2015 (186).

Unlike stock market indices, the Hagerty Market Index is adjusted for inflation via the Consumer Price Index. So these are “real” changes in price levels.

The index has now fallen nearly 7 points below the level of August 2014. That was three years ago! In fact, the index is now at the lowest level since March 2014.

The chart below from Hagerty’s August report shows how the index surged 83% on an inflation-adjusted basis from August 2009 to its peak in September 2015, and how it has since given up one-third of those gains. This is what the inflation and deflation of an asset bubble looks like (I added the dates):

During the Financial-Crisis, the index peaked in April 2008 at 121.0, then plunged 16% (20 points) to bottom out in August 2009 at 101.39. By then, the liquidity from the Fed’s zero-interest-rate policy and QE was washing across the world, and all asset prices began to soar.

The current drop of 15% from the peak in “real” terms is just below the 16% drop during the Financial Crisis. But the current 28.4-point-drop from the peak exceeds the 20-point drop during the Financial Crisis.

Concerning the current market, the Hagerty report added:

While the auction activity section of the rating had been kept strong by increases in the number of cars sold at auction so far this year, the trend hasn’t continued and auction activity decreased for the second consecutive month thanks to a 2% drop in the number of cars sold compared to last month.

 

Private sales activity also experienced its second consecutive decrease, again thanks to a small drop in the average sale price as well as a small drop in the number of vehicles selling for above their insured values.

 

The number of owners expressing the belief that the values of their vehicles are increasing continues to gradually decline, and this is true for the owners of both mainstream and high-end vehicles. The drop is particularly pronounced, however, for owners of previously hot models like the Ferrari 308 and Ford GT.

 

For the second month in a row, expert sentiment dropped more than any other section.

The asset class of vintage automobiles was among the first bubbles to pop. This didn’t happen in one fell swoop. It’s a gradual process that started in the fall of 2015, and observers brushed it off because it was just a minor down tick as so many before. But since then, it has become relentless and persistent, with plenty of ups and downs. Every expression of hope that it would end soon has been frustrated along the way.

And every day, there’s still hope. For example, back in May, the Hagerty report commented that “prices have started to normalize.” Since then, the index has continued its methodical decline.

This may be what asset class deflation looks like under the new regime. There will be talk of “plateauing,” as is currently the case in commercial real estate. Then there will be talk of prices “normalizing,” as is the case in collector cars. Then there will be talk of “buying opportunities,” and so on. And there are ups and downs, and this may drag on for years.

But month after month, buyers of vintage cars become a little less enthusiastic and sellers a little more eager. Yet, unlike during the Financial Crisis, there are no signs of panic. The tsunami of liquidity is as powerful as before. Financial conditions are easier than they were a year ago. There’s no forced selling. Just an orderly one-step-at-a-time asset bubble deflation.

Now the Fed is tightening. QE ended about the time the classic car bubble peaked. The Fed has raised its target for the federal funds rate four times so far in this cycle. It will likely announce the QE unwind in September and “another rate hike later this year,” New York Fed president William Dudley told the AP. And the below-target inflation is not a problem. Read… Fed’s Dudley Drops Bombshell: Low Inflation “Actually Might Be a Good Thing”

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El Oregonian's picture

I love my 1968 383HP Roadrunner I bought for $1100.00 in 1978. SWEET!

 

Fish Gone Bad's picture

I have an old 1960 model 212 VW that I got for free.....  That thing is bullet proof.

jbvtme's picture

who wans to invest in classic cars when you can buy bitcoin???

Creepy_Azz_Crackaah's picture

1969 Firebird convertible. Went from $3000 to $30000 pretty quickly. I won't be selling it so who cares about its paper value? It gets driven regularly...

The 50mpg, 1981, diesel VW Rabbit pickup hasn't taken off like that but it saves me a LOT in fuel costs.

mtl4's picture

Graph matches exactly the liftoff on the FED funds rate, big surprise.

Lurk Skywatcher's picture

Nah, its just that the collectors have realized classic cars will be the next leftard "destroy history" focus.

Already started with a Challenger the other day, albeit a few decades early. No surprise there though because we all know leftards can't count.

TBT or not TBT's picture

They're EMP proof.   Gives you a chance to bug out of urban and suburban death traps before the great killing and dying spree gets under way, vs riding it out in place.    Another way to go:  load up your e-reader with great books and keep it in a faraway cage.  

DEMIZEN's picture

not a bad one. or a file server with a ups battery and 400w solar panel.

canisdirus's picture

Most cars are EMP-proof because they're metal boxes with fairly short wires. The fixed electric grid is what will get damaged.

jcaz's picture

There were some weird bubbles even within collectable cars that sorely needed popped-  the whole early 70's Porsche 911 fad got insane,  rusted out pieces of shit selling for over $100K,  RS clones over $200K-

But ya- in July/August there has definitely been a disturbance in the force,  lot of prices coming down hard-  almost like a real market.......

Citxmech's picture

No shit.  Bought a 1970 911S for $5,500.00 back in the day.  Now I can't even afford to insure the fucking thing - not that I'd want to risk it on the street anymore...

Looking for a 69 912 to make a driveable hot rod out of but just refuse.  Not paying $40k for a 912, no how, no way. 

SmittyinLA's picture

Porsche prices are going insane right now

http://www.ebay.com/itm/1970-Porsche-911-/253099113520

Especially original ones

BillyBass's picture

What the fuck is up with 912's?  Holy shit!  A few years ago, they were cheap, now...... 

tyrone's picture

I bought a new one in 1966 for $4950...
Aga Blue it was..
only lasted 6 months..
on New Years day, an Edsel centered me on the R side..
I only got one trip down into Mexico with it too...
(sigh)

a Smudge by any other name's picture

On the subject of a rusted out Porsche?

Even in high school I loved the 9/11 series but I eschewed the status and vanity aspects. I thought the coolest thing would be to have a very well maintained 9/11 but let the body rust to shit. Burn the pain off with a torch. Park it right next to the guys at the club. And if they laugh, let's compare tires. Yeah you got a nice machine too bad you don't use it.

Life was not as kind to me as some of you but I got to do this with motorcycles. I can waste riders on the track with my 1959 BMW R69S. Well in vintage series anyways. And absolutely on the street.

It's not about status, it's not about getting the ladies it's about you and that machine. It's a love affair.

Citxmech's picture

Just so you know - I used to drive the shit out of mine.  The early S cars suck on American-style roads.  Awkward transmission pattern and gearing.  No guts until you hit about 4k rpm - from there to 7k it was pure heaven.  Nothing sounds like an air-cooled, mechanically injected flat 6.  Obviously they were made for the authobhan.  Once you are on the cams though, that thing actually accelerates on par with my double-pumper equipped 4 speed 69 GTO.  Of course, I can double the speeds posted on ramps.  God it loves to corner.  Early 911s are the best handling cars I've ever experienced.  They're like go-carts with balls.

tyrone's picture

saw a ruby red 959 go for $1M in an auction a few weeks ago

Planet Israel's picture

The Dodge Challenger is one of the big red flags that this was orchestrated.  Using the Challenger is like turning the blade after tearing down the most sacred thing to these "racists", their statues of Bobby Lee.

https://www.youtube.com/watch?v=BqXWhG6IZ50

There are so many subliminal links to the Dukes of Hazard and General Lee.  This was no coincidence, it was a massive psyop.

Fly over country just got mugged.

EDIT:  I was just thinking of how they would accellerate General Lee at the last moment before jumping over Boss Hogs car.  And then there is Vanishing Point with Kowalski.  It had to be a Challenger.

 

Golden Showers's picture

Like the space shuttle? The Endeavor to Discover Atlantis, all Challengers will be destroyed? Yeah, but I was also thinking about the Dukes of Hazard today. What a strange phenomenon.

TheVigilant1's picture

The General Lee from the Dukes of Hazzard was a 1969 Dodge Charger not Challenger. 

 

bonderøven-farm ass's picture

1993 Toyota p/u, 22R-E, with extended cab.

Life-time achievement vehicles.... meh

STP's picture

22R has to be one of the best 4 cylinder designs ever.  The only other 4 banger that comes close is the 2.3L Ford, that lived for decades in everything from the Ford Pinto, to the Turbo Thunderbird, the first SVO Mustang and countless Ford Rangers.

Placerville's picture

You need an 85 4Runner 4x4 straight axle w/FI

NurseRatched's picture

It is all about demographics.  1960s. muscle cars are for the enlarged-prostate baby boomers. 

And they are starting to die off now.

Many of these "classic cars" are just used cars.  You won't find buyers under 50 yeas old at these auctions.

curbjob's picture

Yup. No garage parking at the retirement village and millennials are broke.

Conscious Reviver's picture

^^^ This.

Expect more Jewish lightning.

insanelysane's picture

Same with old Harleys.  Their boomer owners are getting too old to ride.

Diatom's picture

The Pentagon says the empire is collapsing...

You can see that in american motorbikes... Harleys and Indians are a joke!

The  japanese now make rockets: YZF's, CBR's, H2's, GSX's...

Diatom's picture

More 3 or 4 years and i'll be able to buy an 2005 SL 55 AMG. The motherfucker has the same engine of the carbon fiber SLR.

500 hp with a screw type supercharger. Sounds like a Spitfire Merlin. Beautiful sound...

It will be a classic definitly.

SILVERGEDDON's picture

Yeah, sure. Everybody said that about brass era and pre war collectables 40 years ago- all the owners and die hard collectors were dying off, and so that market wasgoing to go all for shit and tank too. 

New blood entered the market, and those car values continued to escalate. Same thing will happen here.

Plus, the internet and $2500.00 ships a car by container anywhere on the planet.

What was once a local market, then regional, has become an international market.

Way more money chasing a dissappearing asset class - blue chip collectable classic cars.

Plus, smoking the tires, getting a blow job, and road tripping in your investment beats all hell out of opening the vault every now and then to look at your stupid fucking painting that is worth way more, but won't even get you to first base with a desperate housewife.  

Juggernaut x2's picture

When I was young(20s) I used to get laid nonstop and I drove a rusted out VW Fox- if you need a car to get laid you must be pretty lame looks- and personality-wise

SILVERGEDDON's picture

Nah, back then, we were smart enough to buy cheap Pontiac Bonnevilles with bench seats. 

Like a fucking hotel on wheels.  It ain't what you drive, it's how you drive her. 

What I was really trying to say, is cars give you the added interest of memories and adventures.

That is something other investments can never do.

When you are an old fucker, you will understand the importance of that fact.

Maybe.  

Déjà view's picture

Custom vans were rated PG...Pussy Grabber...

STP's picture

People claim that my vintage Corvette Stingray is a chick magnet, but in reality, most women, don't even care.  My car is much better as my selfish toy and I'd rather be alone.  Just me, my little  bitch of a Corvette and a factory four speed under my right mitt.  Romp it, stomp it and there's nobody next to you, freaking out.

 

PS:  Wife #4  is really good about it, though.

 

And I upvoted you on the investment part of your thread, but most cars are worth a lot less, than what they have into thwm.

RevIdahoSpud3's picture

Everyone keeps mentioning boomers dying off made me look at today's local obits. I wasn't there! Class of '46.

SubjectivObject's picture

I came this " close to getting one of those diesel boxed bunnys

sold as I was walking up after rushing over

seller had said he'd wait for me ...

Creepy_Azz_Crackaah's picture

If you do get one make sure that the block isn't cracked (oil will probably be in the coolant) and that the shock towers aren't rusted through, or close to it. The 11 mm head bolt blocks cracked a lot. VW changed the block in 81/82 to 12 mm head bolts. They are supposed to be stronger blocks.

Once all of the initial cleanup and fixes are taken care of they go for a LONG time. And at 50 mpg (@65 mph) and 42 mpg around town.

Dsyno's picture

"The 50mpg, 1981, diesel VW Rabbit pickup hasn't taken off like that but it saves me a LOT in fuel costs."

It also saves you from attracting females and all the costs that come along with that. Win/win.

Slammofandango's picture

Oh yeah, especially the baby blue ones...those were made with that specific thought in mind.

AGuy's picture

1969 Firebird convertible. Went from $3000 to $30000

So the price remains unchanged if inflation is counted for.

The issue is that Boomers are reaching the point when they can no longer drive these cars or can't afford them. Younger generations either do have the money or interest in buying them. If you have a classic car that your thinking of selling, consider selling soon before the classic car market implodes.

Yog Soggoth's picture

Probably a good thing for the vintage crowd. People who know nothing about the cars, just looking at the value, was what was spurring the whole thing. Hopefully soon the pump and dump money will run out, and people can go back to restoring. It currently costs less to buy a restored car than it does to restore an old one, but a whole lot of that is because of the cost of everything involved with the trade. Sandpaper, chemicals, overhead, and skilled labor are expensive right now. The reason they are so expensive is that the trade has died. Try finding a guy who can fix an old radio, vulcanize a tire, or repair a radiator.

ThirteenthFloor's picture

+1. 1967 Firebird 400 Convertible, Hurst 4 Spd. Keeping it till I ain't breathing no more.

Gen. Ripper's picture

Who the fuck cares what billionaires can afford? The rest of us are just trying to survive.

Erek's picture

It's difficult enough just paying for gas, tires, oil and insurance.

BillyBass's picture

A lot of baby boomers have serious money tied up in collectible cars.  Monterrey is an extreme outlier.  Super rare cars will always fetch top money.  Though, everyday classics like air-cooled porsches and American muscle cars have been dropping for a year.