The most important classic car auctions are over. 

Some very important classic cars got sold for some strong numbers. But there is no doubt – the classic car market is weakening. I don’t even have any data to give you as the auction houses have not released it yet. But just simply following the auctions from Switzerland some 5800 miles away from Pebble beach it has become obvious even without any data.

The classic car market is weakening. Big time.

I predicted the market would weaken already in 2015. And that the car market would continue to lose momentum this year. Turns out my predictions were not that bad.

Seller’s expectations are still too high and it has become a clear buyers market. If the prices were too high – there were no buyers. It is very clear we are still in the early process of having to reduce expectations in terms of what owners can expect to get for their old cars. And the auction houses still seem to be in wonderland and have not done a good job of being realistic and guiding owners (although Gooding seems to have done a half way decent job – which explains their relatively high sell through rate at 80%).

After a 6 year bull market in classic cars, from 2009 till 2014 – the market is correcting now for the second year in a row. Lets take a look at some examples.

I think the main theme of 2015 is continuing straight into 2016. If the quality and rarity is exceptional – strong prices can still be achieved. As American super collector P Goodwin told me, ‘the market still commands respect for rarity, provenance and importance’.

A perfect example is the Le Mans winning and extremely original Jaguar D-type that sold for $21.8 (estimate was $20-25) and set a new world record for any Jaguar. Another record result was set in the pre-war category with the Alfa 8c Lunga selling for $19.8m (it was also one of my top picks in my previous post). Another superb rare car, a Ferrari 250 California spyder competition sold for $18.5m including commission. A strong price but how many competition California spiders exist? Only nine. Neun. Neuf. Nove. My point is if a car was exceptional and rare – the buyers will pay. Even the almost unique and extremely rare color (gold like Nocciola / a hazelnut copper color 106-M-27 ) Ferrari 275 GTB/4 was sold for a healthy $3.3m – quite a decent strong price in todays weakening market.

But the broader market is clearly weakening.

Look no further than the once red-hot vintage Ferrari market where a major correction is taking place. Normal Ferrari 275 GTB’s are now selling for $1.7m including commission and Lusso’s are barely breaking $2m ($2.09 all in) – this was unthinkable only a year ago. The 250 Lusso’s result is even more remarkable given the exceptional condition (restored by motion products) and attractive color combination, not to mention classiche certified. Even the beautiful (and was bullet proof in terms of investment potential) silver/ red  Ferrari 250 SWB Gooding was selling (with known history from day one) found no takers at $9.2 bid (mostly likely not a real bid). A 250 SWB competition version sold only after hours at $13.5m  (far below the estimates of $15-18m).

Vintage Ferrari prices are a good 20% off their highs since 2014. In many cases even more than that. Dino’s, Daytona’s today are trading far below 20% from their recent highs.

The most drastic sign that the vintage Ferrari market is weakening came from the stunning first series 250 TDF (main picture above). This dream car had everything a collector could wish for. Racing history, originality, rarity and model importance. This car sold for a mind – blowingly low $5.7m versus an estimate of $7-9m.  In this case the estimates were accurate but in a weakening market – prices are just a whole lot lower.

It is dramatic how times of changed in the classic car market. Two years ago the Vintage Ferrari market was a ticket to financial success. You could do no wrong buying a 1950s, 1960s Ferrari. It was investment proof according to brokers, dealer and collectors. Not anymore. Its not just that Ferrari is weakening. Porsche (356 speedsters, 911), Mercedes (Gullwings included) Maserati (3500 GTs), Aston Martins (DB4, 5, 6 series) are all showing severe signs of fatigue. 

(Believe it or not the one brand that showed resilient strength as a brand was Lancia. Both B24 Aurelia America spiders sold for superb results and both times well over the high estimates even reaching $2m. Lancia was strong despite the Flaminia Zagato failing to sell – although a high bid of $625 is certainly a strong bid. I should also mention that a Lancia Astura from 1936 when best have show at Pebble Beach).

It is clear now that the classic car market is wobbling. 

I remember back in 2013 I was toying with the idea of buying a steel Ferrari 250 SWB and selling all my cars to finance one. I was told there simply are none on the market. And when one appears the price is $8m minimum. A few months later in mid 2014 the price had moved upwards to $10m. I asked what had caused the move and was told that demand had outstripped supply (don’t need an economics degree to understand that one). Price increases of a million every few months were normal a well known dealer told me at the end of 2014. A few months later the price of $10m was no longer enough, prices had moved to $11m and I had to be put on a long waiting list with almost zero possibility of being allocated one.

How times of changed.

There is no doubt – we are in a period of price adjustment in the classic car market. The auction house price estimates continue to be much too high. As our owners expectations. So are the price expectations of the major dealers. I think the entire industry needs to adjust their expectations downwards. As one expert in vintage Ferrari has rightfully told me: ‘There are currently 7 Ferrari 250 SWB on the market right now. How many SWB do you need? How many can the market absorb?’

I think the classic car market will take a while to play itself out and find a new base. Right now the buyers have the power to dictate prices they find acceptable. There is a famous saying that buyers should pay attention to right now. ‘The trend is your friend’. And the trend in prices is clearly downwards.

I don’t see that changing anytime soon.

(Main picture credit: RM Auctions).

by Edmond Saran