Has the classic car
market crashed?
By Joe Castellino, BSc (HONS) ECON,
JOINT FOUNDING DIRECTOR,
LE RICHE AUTOMOBILE RESTORERS (C.I.) LTD
Enthusiasts and observers alike will have noticed a change in mood in the classic car market over the last year. There are fewer headline classic car auction results, the news media is more subdued and industry magazines and publications less euphoric. More edgy types talk of a sharp correction while the “I told you so” pessimists out there are talking of an imminent crash!
With books like “Classic cars, better than gold” tempting investors and regular, repeated news headlines about rare cars achieving stratospheric sales figures at auction being a common feature of the last 10 years, it is now evident that the last part of 2017 witnessed a more subdued classic car market evolve.
But is this a market crash? In my opinion, I don’t think so. Having co-founded Le Riche Automobile in 1990, we did witness a real crash in the classic car market. The market rose artificially spurred on by Mrs. Thatcher’s “greed is good” market philosophy, rocketing property prices and an ever-increasing willingness to borrow money. A new and sexy lexicon of terms developed around the borrowing of money. Terms such as leverage, gearing and equity release applied an acceptable veneer to easy credit. The market was awash with bank and lending house loan products, some of which were even tailored to classic cars enabling 100% LTV and they were super easy to access. The market became overrun with inexperienced speculators who borrowed heavily to cash in on what appeared to be an unending upward curve of ever increasing classic car prices.
1972 Jaguar V12 E Type Roadster
In 1989 you could buy a 1988 Porsche 930 Turbo for £65k on the Friday and sell it for £75K on the following Monday. So why wouldn’t you? There were no market buffers or real pricing formulas to follow,
Page 16 20/20 Our Money 1985 Lamborghini Jalpa
and market dynamics looked like the Dutch Tulip market of the 17th century. Of course this market was destined to fail and fail it did. When the Russian economy collapsed in 1990 and there was a significant tightening of credit globally and an inevitable increase in interest rates, the market was revealed as a speculative bubble funded by borrowing. Almost overnight values crashed by as much as 75% and many people were left seriously exposed. Loan payments could no longer be met, classic car dealers were forced to unload their “loan funded” stock and a downward spiral in values ensued.
Today the market is a little different and the most noteworthy feature is that collector cars are not being bought by easy money speculators with borrowed funding. Today, a nice classic car is a recreational trophy, a personal reward bought from hard earned income. Men ( and women for that matter) will not, overnight, stop loving elegant historic cars. They have a truly global appeal and pricing is more formalised and valuations are more standardised and based on rarity, condition, provenance and history.
This has not stopped a little froth developing on the top of this market, as it undoubtedly has, but rather than the term “better than gold”, today the phrase “all that shines is not gold” is better suited to the present market.
Like any field of endeavour, the key to success is experience and wisdom and classic cars are no different. A car’s value proposition is made up of many factors; rarity, provenance, condition, and
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