The classic car market: I’m calling it

October 30 2019
The classic car market: I’m calling it

Second-hand Style, with Richard Cooke

THE classic car market has gone just one way for the last twenty years – inexorably up. Several hundred percent up, in particular between 2009 and 2015. I’m calling it now though: the bubble is starting to lose its firm lustre. Watch it deflate or collapse for certain marques over the next five to ten years, as market forces and, more importantly, demographics play out.

 

So why now? Three reasons. The first two will be familiar to the awfully clever analysts who are paid eye-watering sums of money to predict the future value of assets. The third reason is often missed by the teenage scribblers, because it isn’t so easily modelled. If I’m right, it’s bad news for the chancers (sorry, ‘investors’) holding onto valuable motors purely for profit. But then it’s great news for those of us who love classics for what they should be – an enthusiasts’ hobby. I maintain classics should be driven and used, not stored away like gold bullion.

So, reason one for the imminent decline in values: there are no fundamentals underpinning the classic car market. Unlike housing, no-one actually needs a classic car. And although supply is limited, an upside to the recent rise in values is that classics which would once have been scrapped are now being expensively restored. Classic cars will never be worthless either – a vehicle that moves and can take you places will always have some value. But that value is entirely dependent on what people are prepared to pay and, in the case of classics, they will start to rank below other more important considerations. The market is also partly propped up by an absence of other attractive places for investors to put their money.

 

Reason two: there is usually a cost to holding assets. A house costs you council tax and maintenance. Your investment manager charges you a fee. That cost is bearable whilst the asset’s value is increasing or is perceived to be increasing. But if you are hanging on to an Aston Martin worth £200k and the value stops rising, and then starts to drop, are you so happy to pay £2k a year for storage and another £1k for insurance and preventative servicing? Car collectors say that this is an investment you can enjoy – you can drive it. But hold on: What if it gets damaged? And the value is inextricably linked to how low the mileage is, so you don’t want to drive too far. Remove the enjoyment and investors will question if their money could work harder elsewhere. You won’t hear vested interests (dealers, journalists, collectors) talk about this above a hushed whisper.

 

Reason three: baby boomers. Or rather, demographic change. Retirees aged between 60 and 75 with disposable cash have splashed it on the cars they couldn’t afford in their youth. This partly explains the huge rise in value of classic Jaguars, Ferraris, Mercedes and Porsches. But the boomers are starting to die, and leaving their priceless motors to children who would rather use the money for something else. Think school fees, paying off the mortgage or covering a whopping inheritance tax bill. Generation X are buying the cars they craved when young – the Peugeot 205 GTi, BMW M3s, Lancia’s Delta Integrale. Their values are correspondingly shooting up. As for Millennials, they aren’t even bothering to learn to drive. And those that do want an electric car, to impress Greta Thunberg and their Extinction Rebellion peers.

 

To be clear, not all classics will lose value. But some simply have to, as demand for them evaporates. This month’s picture is of a 1974 Jensen Interceptor Mk3. It was powered by a 7.2 litre Chrysler V8 engine, indifferently mated to the very pretty Italian body by a borderline militant workforce in the Midlands. It is both achingly beautiful and tragically flawed; Interceptor rust never sleeps. In 2001 I almost bought a reasonable example for £5k. Today a specialist will charge you £80k for a restored car. Just try selling it to a 35-year-old who needs that amount for a house deposit, has never even heard of Jensen and thinks 12mpg is a YouTube influencer.