One week ago, the collector car world descended on Arizona’s Phoenix Valley for the annual fest that is simply known as “Auction Week.” Most of the major auction houses are spread throughout Scottsdale, and they can be broken into two different camps.
The first is the “Fine Art Group” (think RM, Gooding and Bonhams). They basically conduct a fine art-type auction with quieter, more methodical bidding, where the art being sold happens to be collector cars. The other camp is “Mass Appeal” (primarily Barrett-Jackson but also Russo & Steele, Silver Auctions, etc.) where one can find cars from their childhood, things that were likely in their parents’ or neighbor’s driveway. At these sales the auctioneers rapidly fire off numbers and phrases, and it takes a good, practiced ear to clearly understand what is being said.
While both types of auctions have their attributes and drawbacks, it is the wide-ranging selection of cars, minimal traffic compared to the Monterey week, hotels and resorts that keep room rates close to or at normal prices, and spectacular weather that has buyers, collectors, dealers and enthusiasts coming from around the globe. This crosscurrent of machinery and people has many believing Auction Week is a good indicator of how the balance of the year will go.
Now that the final auctioneer’s gavel has dropped, the post-auction sales are done and the numbers are in, what did we learn? My top takeaways from this sun-filled automotive orgy are:
- For some time now pundits have not come out and said an obvious four-word phrase, a trend that Auction Week seemed to confirm all the more: “The market is soft.” Why there is such reluctance to state the obvious I don’t know, but the long and short of it is it’s clearly a buyer’s market. Sure, there are outliers here and there but in general overall prices seem 20-40% down from their 2014-2015 highs—with no signs of strengthening in the near future.
2. Perhaps the most alarming aspect of this new normal is there doesn’t appear to be a lot of new blood coming in to replenish what the “Fine Art” market seems to be losing—individuals who are interested in cars from the 1950s and ‘60s, and pre-World War II. When stating this observation to a handful of dealer friends and collection managers, the word we threw around the most was “stagnant” in terms of the buyer pool, with more than one noting it seems to be slowly decreasing as time moves on. In other words, the generational shift so widely discussed is continuing to have an effect.
3. This year Europeans and Brits seemed to be non-existent, which is unusual for Auction Week. No doubt a strong dollar is affecting their purchasing power, and the potential fallout of Brexit also has some worried—witness a conversation with Bonham’s affable staff that was clearly divided on what the eventual outcome would be, but all did express concern.
4. The “Original Hybrid” trend discussed two weeks ago in this space continues. There, we examined how many “Transatlantic Marriage” cars (those made in Europe that are powered by American engines) now bring as much or more than their homegrown counterparts. We spoke about Iso Grifos being close to or on par with Ferrari Daytonas, and two Daytonas selling for $522,000 and $577,000 confirmed the Ferrari part of this pricing trend. Interesting too was a cosmetically modified but quite tidy Intermeccanica Italia bringing $123,000, an unheard of amount just five to seven years ago. (Indeed, going much further back I remember Italias struggling to bring $12,000.)
5. As noted above, the marketplace has two distinct audiences—the “fine art” crowd, and mass appeal—and there is very little crossover between the two. Sure, there were a handful of art auction denizens up in Craig Jackson’s Skybox, but in general the fine art crowd is loathe to go to the Mass Appeal auctions even though there are a good number of potential arbitrage cars there—those that could be bought cheaply, and sold at a higher price in a fine art setting. This also makes the Fine Art crowd oblivious to certain trends, such as…
6. Restomods are big, and getting bigger. For the past several years, Barrett- Jackson has seen some restomod Corvettes, Camaros and Mustangs bring double what their fully restored “matching numbers” counterparts would sell for. After spending time with Barrett-Jackson’s Craig Jackson and Steve Davis, and several people involved in building restomods, the pieces of the puzzle came together on why this trend is expanding. We will dive deeper into the phenomenon at a later date, but to succinctly describe the cause, the laser-like focus and thus over-emphasis on only having matching numbers cars in one’s collection has come back to bite the hand that force fed it to everyone for so long. Today, a great number of people simply want to enjoy the machine for what it is, and actually drive it, rather than worship how it was restored and/or originally built.
7. Even “Big Cars” need to be priced right to sell, which is a sure sign of how buyers are now in control of the market. Two seasoned market insiders were “in the room” during RM’s sale of the lovely Princess Lilliane one-off Ferrari 250 GT, and both said there wasn’t a single real bid on the car. A super hefty pre-auction estimate ($11-13 million) may have scared off the real money, but the 250 MM, Tour de France and SWB all sold at Gooding for around $5.4 million, $5.9 million and $7.6 million, respectively. These prices are probably $2 million lower than their values four to five years ago, and sold because the consignor’s expectations were real for today’s (and here’s that phrase again) softer marketplace.
8. Price, rather than value, still rules perceptions. Too many people focus on the “flavor du jour” or trying to figure that out, rather than searching for true intrinsic value. An ideal case study also shows how many market segments are off 20-40% when my old 1965 real deal Fuelie Corvette Roadster sold at Bonhams for a shade under $110,000. This is more than $30,000 less than the consignor (a dealer friend) paid me for the car. Intriguingly, an early L72 1966 Corvette Roadster (427/450 horse) brought the same money at Goodings; both Vettes were very highly regarded in the day, rare, quite engaging from behind the wheel, and at the upper echelons of performance at the time of their manufacture–especially the 427. Yet these days nobody seems to care about such truly relevant criterion.
9. In this softer market, more than ever the Number One Rule for purchasing remains intact: Buy what you want, not because you think a car will go up in value. And get the best example you can afford. Those two axioms will save you from the heartache many of the last five years’ speculators must be feeling right now as they exit the market.
10. Looking to the future, Ford’s 2020 Shelby GT500 will be an astounding machine, and in more than a straight line. It’s quite an intriguing proposition (think a faster Dodge Hellcat that also handles and stops) and, after spending time with Ford’s Jim Owens, one of the key figures in the car’s creation, it’s apparent this could be the most impressive performer to wear the Shelby nameplate. It’s got Le Mans-winning Ford GT40 performance, but with air conditioning and a stereo system to boot. All this adds up to a potential future collectible, and soon we will take a deeper dive into GT500 heritage…