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What does financial turmoil mean for car collectors?

We last reported to you at the end of 2007, just after Bonhams' Gstaad sale. Much has happened since then, including further turmoil in the financial markets, a falling dollar, several high profile auctions and some lesser known private sales. Let's take a look at a few specifics and see if we can make some sense of the current market.

January, of course, saw the usual pilgrimage of collectors, dealers, enthusiasts and assorted hangers-on to Scottsdale in Arizona, a mecca for auction goers (especially European dealers attracted by a weak dollar and American hospitality) in search of a bargain. This year David Gooding joined the ranks of RM and Scottsdale veterans Barrett-Jackson as one of the main auction houses present, the latter styling themselves as hosts of "The World's Greatest Collector Car Events™" and announcing that this year they would focus on quality rather than quantity, offering only...1,163 vehicles. As always these ranged from the weird to the wonderful: where else would you find a 40 foot tall, fire breathing, car eating Robosaurus (no, I had never heard of it either, but presumably the man who paid $575,000 had), the "iconic Monkeemobile" (nope, nor that one, but it made $360,000) and a recreation of the 1960s Batmobile ($185,000)? More to the point, where else but Scottsdale would you actually expect them to sell?

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Left: Car eating Robosaurus prepares for lunch
Right: Hey, hey...it's the Monkeemobile, one of two built for the 60s TV series: $360,000

Barrett-Jackson has been in the news rather more than intended over the past year due to their 'all no-reserve' policy in Scottsdale: last year one unhappy vendor chained his car to stop it being moved after the auction. Unfortunately for B-J he was a judge. Shrugging this off, they claimed sales of no less than $88m this year, the $1.6 million top price achieved by a 1963 Corvette (yes, a Corvette) bodied by Pininfarina, which makes the classic Ferraris they clothed seem almost reasonable. Equally astonishing, a generous soul parted with $1.1 million to own the first 2009 Corvette ZR1 being sold for charity, making this perhaps a better investment in humanitarian causes than in four-wheeled stock.

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Left: It took $1.6m to own beautiful Pininfarina bodied Corvette Rondine
Right: Charity bidder generously paid $1.1m for first 2009 Corvette ZR1 (ten times list price?)

One of the secrets of Barrett-Jackson's success is the live television coverage of their auctions. Perhaps nothing sums up the cultural gap better: in Europe cameras are strictly banned by the auction houses from filming privacy sensitive bidders, whereas at B-J's Arizona extravaganza the management have discovered that bidders actually play up to the cameras when they realize 'the folks back home' are watching them fight to own something.

Across town, in a slightly more rarefied atmosphere, David Gooding had assembled an interesting selection of cars with both American and European appeal. The top seller was a '59 Ferrari 250GT LWB California Spyder which apart from having the less favoured open headlights (deduct $500,000 straight away- crazy I know but the market speaks...) was also presented in an almost sale-proof colour combination: yellow with black leather piped yellow. The bullish pre-sale estimate wasn't reached but the owner was smart to let the car go anyway: at $3.3m he's still doing well and this California Spyder had little of the appeal of the black, covered headlight example Gooding sold last August. Conversely, $1,540,000 seemed a high price for a 1932 Alfa Romeo 6C 1750 Spyder by Zagato considering that the 'barn find' and unquestionably genuine example at Gooding's '07 Monterey auction struggled to raise $900,000.

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Left: Top Arizona price was for '59 Ferrari 250GT California Spyder at Gooding: $3.3m
Right: Pretty '32 Alfa Romeo 6C 1750 set new record at $1.54m

If it were on a menu RM's style might best be summed up as Transatlantic Fusion: somewhere between the more European approach adopted by Gooding and the cowboy-boots-and-hot-dog atmosphere at Barrett Jackson. RM sets the standard when it comes to lining up buyers in advance of an auction and offering them creative deals to incentivise bidding; watching these side deals being negotiated even as the bidding is already underway is always entertaining. In Scottsdale the firm's work paid off with $2,035,000 paid for a 1936 Mercedes-Benz 540K Cabriolet A (described, of course, as a 'Special Cabriolet'); a six carb, alloy bodied Ferrari 275GTB surprised everyone at a strong $1,375,000 (until the $2 million barrier was reputedly broken for a similar car in a private sale a few weeks later); a 1929 Bentley 4 ½ Litre Vanden Plas tourer (the body to have) soared to $880,000, although sold for just over $500,000 only a few months earlier; and finally an early 1957 Mercedes-Benz 300SL roadster, usually the least desirable version (drum brakes), raised eyebrows when hammered at $742,000, further evidence that these German sports cars continue their relentless march upwards (not into Poland).

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Left: Special car, special price: record $2.035m for RM's Mercedes-Benz 540K
Right: The top goes down so the price goes up: Bentley 4 ½ Litre tourer way over market at $880,000

Back across the Atlantic and the market was keen to see how Bonhams would fare at their first ever French sale, having taken over the Rétromobile franchise from Christie's defunct car department (whose members defected to Bonhams). A bumper catalogue contained some gems such as the rakish Saoutchik bodied 1928 Mercedes-Benz S type (see my detailed sale profile in Sports Car Market magazine: http://www.businessweek.com/lifestyle/content/mar2008/bw20080327_903237.htm) which seemed ironically the best buy of the auction, even at Eu.2,317,500. It sounds blasé but you won't find much else which stands a chance of snatching that coveted Best of Show trophy at Pebble Beach for comparable money.

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Left: Saoutchik-bodied Merc: German engineering, French panache, €2.317m and worth every penny
Right: Patinated or neglected? The man who paid €1.33 million for this T.43 Bug obviously thought the former

Easily the most surprising result of Bonhams sale was the price realized by a scruffy Bugatti Type 43 Grand Sport from a deceased Dutch estate. There is a subtle but important distinction between period patina and modern day neglect and this car didn't exhibit much of the former, so I can only assume that the Dutch trade bidder was overcome by patriotism. It's good to know that happens to dealers too.

Other highlights included a familiar 1964 Ferrari 250GT Lusso with non-original engine which had previously been stolen and cannibalized, but still made Eu.359,500; a 1973 Porsche Carrera RS 2.7 Touring with rally history (but also a non-original engine) which changed hands for Eu.293,500; an ever more fashionable 1969 Citroen DS21 cabriolet at Eu.135,700; and, conspicuously good value when compared to the similar car in Arizona, the 'feature Lot' of the sale, artist Georges Mathieu's 1936 Mercedes-Benz 500K Cabriolet A which changed hands for the first time in over 50 years for Eu.887,500.

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Left: Risen from the ashes: Ferrari Lusso with replacement engine and bodywork, €359,500
Right: Citroën exterted its Gallic charms to persuade a bidder to part with €135,700

Across town, and for reasons probably known to him, veteran French auctioneer Hervé Poulain chose to hold his sale on the same day and at almost the same time as Bonhams which may have contributed to a rather slimmer catalogue, but it's worth mentioning a genuine one-owner Aston Martin DB4 which set a new record (and deservedly so) at Eu.320,700. Fellow owners are still celebrating...

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Left: Record breaking price for DB4 at Poulain highlights premium buyers attach to single ownership from new
Right: This one stayed at home, but Bonhams clinched the sale of the Sauber-Mercedes C9 for over £1 million after the auction, a new high

Crossing the ocean to dwell on just one more US auction, RM held their now traditional sale at the elegant Amelia Island concours on 8th March. The Canadian firm's PR machine enthused that this event would see "over 100 investment-quality motorcars on the auction block" which made me ponder for a moment whether a scientific formula is applied to determine 'investment quality' and how the term 'auction block' makes it sound somewhat like consigning your car to the guillotine...Regardless, the star entry, a 1932 Duesenberg Model J Convertible Coupe (rather plain by the firm's usually extravagant standards) soared past its $1.6-2.0m pre-sale estimate and cost its new owner $2,640,000, showing that the market for 'Full Classics' (an official US term) with the right badge, a bulletproof history and faultless condition (the owner had lavished no less than $1/2 million on this car) continues its resurgence.

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Left: 'Auction block' seeks 'investment-quality motor cars'...
Right: Rather plain for a Duesenberg, but this Murphy bodied convertible still made $2.64m at RM's Amelia Island auction

But of course not all the activity has been taking place in the glare of the saleroom. In private transactions, a 'customer' '55 Jaguar D-type (ie one of those sold to private individuals when new) with minor racing history and no 'stories' (nobody else has borrowed the chassis number and the car had spent 38 years in the same family) set a new record at £2.5 million, but I would suggest this is still not unreasonable for a British racing icon compared to the exalted value of its Latin rivals. Barely a month later and a sister C-type, one which had been raced to within an inch of its driver's life, sold for the same price, once again raising the bar. Also worthy of note, the all-time price record for the Lamborghini marque was shattered recently when a very special car changed hands, further proof that the older cars from Sant'Agata are increasingly finding favour with serious collectors.

A tour of the Essen show in April is always a good way to gauge feeling among European market professionals and this year was no exception. Most reported similar trade to 2007, with prices up and volumes comparable or slightly softer. If you like 300SLs you'll find heaven in Essen: I lost count after 20 of them, with the best Gullwings (and Roadsters, more surprisingly) now breaking through the Eu.600,000 level. Like Mercedes, Porsches also had their own dedicated hall (this show is sehr groß) and I admired a beautifully restored orange 2.7 RS 'M471' Lightweight upon which an English dealer had just agreed a sale for an extraordinary Eu.350,000, about three times what most value guides suggest. A tidy but not perfect Lancia B24 Aurelia Convertible (not the coveted Spyder America) was snapped up for Eu.200,000 as it was being unloaded from its trailer, whilst a pretty Porsche 356 Carrera GS (the 1500cc, four cam roadgoing version) changed hands early on for the same amount. There seemed to be fewer classic Ferraris than in the past ("we just can't get them" complained more than one dealer), more interesting pre-war cars (look how many figure in the top auction results above) and, perhaps most telling, American buyers were in even shorter supply than Ferraris.

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Left: Nothing that patience and deep pockets can't fix- the Essen Show was 300SL heaven
Right: Plenty of Porsches too: a sale was agreed on this '73 911 RS 2.7 Lightweight at €350,000

So what does all this mean?

First of all I believe that some areas, particularly lower down the market, may see a temporary slowdown whilst buyers and sellers peer at each other across the void and try to figure out whether the market is rising, falling or unchanged.

Secondly, I think this will result in more owners concluding that they are not about to give up huge potential short term gains by parting with their cars. Equally, some of the more experienced collectors who have been through earlier cycles might regard this as an opportunity to finally own cars which seldom appear. Whilst it's true that the majority of the truly great cars worldwide are now held in major collections, there are still some which are owned by mere mortals, usually enthusiasts who acquired them long before anyone else took a serious interest. I predict we'll see more special cars becoming available and some new records achieved when the competitive collectors battle to own them, whilst the gulf between the best and the rest will, as has become the trend, widen still further.

And finally, we'll probably see agents- auction houses, dealers and brokers- having to use their skills to put deals together rather than simply relying on a rising market, with demanding sellers expecting top presentation and a hands-on negotiating approach, not just a few photos on the internet, which in turn is likely to put upward pressure on fees.

Ultimately, whether the classic car world represents a hobby, a livelihood or both, a leveling-off in the market should be regarded as a positive development necessary for its long term health and a better environment in which to do business.

Third party comment

By Keith Martin, Editor and Publisher, Sports Car Market Magazine

As the clouds of recession continue to gather over the US economy, we are seeing a gradual slowdown in the collector car market for everything but the very top examples. Nearly every auction company's overall results for 2008 are down from 2007, yet world records continue to be set for specific examples. We continue to be surprised by the few European buyers who seem to be taking advantage of the weak dollar for top merchandise, although we are seeing more German, Dutch and Finnish (!) buyers snapping up mediocre junk at swap meets to send home, presumably to perform typically haphazard, cheapie European restorations and sell them to clients who can't tell a properly done American car from a goofball example.

The fundamental difference between the current runup in prices and that of 1989-91 is that so far, pedestrian exotics like late model Ferrari Testarossas are still worth almost nothing. Fifteen years ago, 308s, 328s and TRs all soared in value along with the blue-chip collectibles, an absurdity.

I think we have another 24 months of upward pressure in the market, as higher prices will entice sellers into cashing out and either moving into other types of investments or other motorcars they are interested in. I also don't foresee the cataclysmic drop we saw in 1991, but rather a leveling at a new pricing level. There are simply more smart, wealthy collectors in the market than there were 15 years ago, and they simply won't ever let a TZ1 drop to $200,000 again.

Keith Martin

Sports Car Market Magazine