Musings on the Motoring World

The classic car market downturn is bad for enthusiasts

If the daily news cycle isn’t already straggling the thin line of sanity and absurdity, the news of a half-a-million-dollar used Toyota MkIV Supra might send you reaching for those smelling salts. Sure, this particular example in the US might be a mint MkIV Supra finished in a rare colour that survived the great Fast and Furious molestation of the early-2000s. Though, even when one were to take into account that prices of MkIV Supra have been in ascent over the last few years and that desirable classic cars are still trading for sums that could put your kid into Harvard, there really isn’t much precedent for a Supra in such condition and spec, considering that examples of similar vintage and condition are currently trading for a fifth of its price. 

This isn’t to say that a Supra can’t be of any significant value due to its “inferior” origins. As discussed here previously, the value of a classic car is subject to a generation’s lived experiences and personal meaning. It is just that, at the moment, nobody in the market is willing to pay Bentley prices for a used Supra just yet.

Speaking of the market, one has to wonder if the seller has taken a look at the classic car market lately. According to last quarter reports, it has been stagnating throughout the year and has recently hit a slump. The highly anticipated Monterey Auction Week in August witnessed the infamous Type 64 debacle on stage and experienced its single biggest year-over-year decline in auctions behind the scenes.

This isn’t to mention the number of high-profile auctions that either failed to meet expectations, such as the one-of-two McLaren F1 LM High Downforce that sold for $4 million under its expected $23 million estimate or simply failed to meet the reserve. The Monterey Auction Week numbers in comparison with previous years look grim in both total auction sales and sell-through rates for big-ticket lots. 

Hagerty, the Holy Bible for cashed-up tweed-wearing car collectors, describes the slump as a “market correction” sparked by fears of an impending market downturn. However, with much of its interests leaning heavily on the wellbeing of the classic car market, Hagerty’s word might tinge of a slight bias. Other observers have speculated that the classic prices have finally hit an impassable ceiling and that the market is on a one-way trajectory for a self-implosion. 

Now, before you dump your bonds and sell the family estate in anticipation to pick up a classic Ferrari on a dime, Hagerty’s price indexes don’t indicate any freefall in prices. In fact, prices for the Ferraris and Blue Chip classic cars have been plateauing over the past year with a recent minor drop in prices. 

That being said, if you are ready to search the back of your couch and mortgage the family apartment to settle for a mint Datsun 240Z, now might be the time as the only price index that is showing a strong upward trend are the “Affordable Classics”, cars that Hagerty believe, don’t have as great of a prestige but have recently caught the eye of the more endeavours collector. And therein lies the rub for car enthusiasts. 

The obsession over old-world names steeped in the traditional values of aristocratic favour and motorsports glory had been a blessing in disguise for today’s younger generation of car enthusiasts who grew up with Gran Turismo and only watched the Nicholas Cage version of Gone in 60 Seconds.

This meant that the Japanese and European sports cars, the pinnacle of 90s performance and desirability, pretty much flew under the radar of the classic car snobs. This gave young car enthusiasts the chance to aspire and enjoy affordable classics from their youth as they please. That might not be the case for much longer.  

Fortunes in the classic car market haven’t evaporated but merely shifted. Because of that, it stands to reason that car collectors and speculators aren’t just going to desert the market in droves but move onto untapped pastures as any learned investor would.

Just as the soaring values of the classic car market in the last 12 years had changed people’s perceptions of classic cars from milk cartons past their use-by dates to potential wine-casket commodities, the same bodes true for what Hagerty classifies as “Affordable Classics”. If Hagerty’s “Affordable Classics” price index is taken as an accurate barometer, its 76 per cent rise over the last four years would have the more savvy collectors scrambling to snap up relatively cheap future collectibles before they become the next collectible at Monterey. 

With the top end of the classic car market now blown pretty much out of proportion and netting lower returns than previous years, collectors would be drawn to the investment potential of modern classics such as the Nissan R32 Skyline GT-R, Honda NSX, BMW E46 M3, and Porsche 997-gen 911s, then bundling such cars away into hidden garages, increasing its rarity in the real world, and waiting for the day when obnoxious valuations at auctions are achieved. 

Nowadays we still have the luxury of laughing in disbelieve at a 500-grand MkIV Supra. But given time, market realisation, and a little market rush, that would be a future nobody but the seller would be laughing at.

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