Hobby-car market's ups and downs. Failing U.S. economy sees huge price drops, but finest autos will still attract top dollar.
DAVID GRAINGER, Canwest News Service
Published: Tuesday, May 13
The sinking U.S. economy, which could soon have that country in the most dire straits since the Great Depression, is having its effect on the hobby-car market.
During a boom, almost any old crock of a car becomes the apple of someone's eye. I remember the classic-car frenzy of the 1990s when every old Mustang at a local wrecking yard seemed to disappear overnight as collectors and speculators raced to acquire them, even though they were stripped hulks that had sat in the back of the yard for decades.
The recent boom in '60s and early '70s muscle cars, fuelled by ridiculous prices at auctions, has created much the same phenomenon. Even poorly restored and miserably abused cars saw ridiculously high prices paid for their purchase.
Those days are as dead as the dodo. The muscle-car frenzy is finished.
Increasingly desperate owners in the United States are starting to dump their prized possessions onto a glutted market that has no more interest in paying their previous purchase prices than an average person has in cultivating a case of hives.
So begins the falling leaf pattern of hobby-car sales, where increasingly fewer buyers wait increasingly longer to make their acquisitions, revelling in the satisfaction of seeing prices drop week by week as more and more cars are offered up.
So, if you were a savvy car collector, how would you avoid this disaster?
Simple! The collector-car market has always been boom or bust, each decade seeing a new generation of cars subjected to the feeding frenzy. Lately, it has been 1960s and early '70s muscle cars and luxury cars. Ten years ago, it was cars from the '50s. The decade before that was hot for vehicles from the '40s - and so on. These frenzies are created by nostalgia-driven buyers who are finally financially capable of purchasing their adolescent dreams.
Savvy collectors actually lose little or nothing during these boom or bust periods. In fact, they can profit from them.
How? Cream always rises to the top.
The disastrous Barrett-Jackson auction in Scottsdale, Ariz., last January demonstrates this. There, owners spurred by greed and a little desperation put their cars in the hands of an auction house that had become so flushed with success that it demanded every car in the auction be consigned without a reserve. As a result, Barrett-Jackson could boast almost 100 per cent sales, albeit at the expense of sellers whose cars were auctioned for fractions of what they had been led to believe they would receive.
Cars featured at that auction are in vogue and a circus-like atmosphere pervaded their sale, which is instrumental in creating a set of purchasers who lose contact with reality - and their wallets.
At the same time as the Barrett-Jackson auction and on the other side of town, sellers at the RM auction were receiving incredibly high prices for their cars that sophisticated buyers purchased with few regrets. The difference was that RM's international auctions have not concentrated on the latest crazes. They have been far more discriminating in their choices and now reap the benefits.
Over the years, RM has appealed to the highest level of collectors by sourcing only the highest level of cars - cars that are actually more art than transportation. In this world, cars costing less than $100,000 are aberrations, while those with values of $1 million or more become common. At this level of activity, there are always buyers and sellers, even during economic downturns.
While the failing U.S. economy will see even more dramatic reductions in collector-car prices, there will be an exception for the very finest automobiles.
Perfectly restored cars of great rarity will hold and possibly appreciate in value even during tough times. Even if prices do slump, it is usually a minor, short-term affair. Most owners simply enjoy their classics while waiting for market conditions to improve.
Such fine cars as Bugattis, Duesenbergs, V16 Cadillacs, Rolls-Royce Silver Ghosts, Delages, Delahayes, pre-war Mercedeses and Talbots - while seemingly obscure to the 'Cuda or Chevelle aficionado - will continue being sought after and coveted by sophisticated collectors.
Some muscle cars will hold their exceptional values, but only those that are perfectly restored or scrupulously original and those that were built in small numbers for special purposes and that have indisputable provenance.
Cars not meeting these criteria will languish in the bargain basement bins.
For those lucky individuals who are not adversely affected by poor economic conditions, there will be deals galore for hobby cars - such as most muscle cars. But those deals are unlikely to extend into the realms of the finest collector cars.
Judging by past performance, those cars should continue to appreciate over the years in much the same way as any fine art.
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