Results from the Amelia Island auctions last weekend normally would be the biggest thing on our minds here at Hagerty (total sales were down only 3 percent, despite there being one fewer auction house present). But even in the bubble of collector cars, concerns about COVID-19 and its impact on the health of the world’s population and economy are hard to ignore.
Although the health of the collector car market might not be a major concern of yours right now, it is our area of expertise. We have, over the years, constructed a model—represented by the network graph pictured here—to determine what factors are important to the collector car market, and which ones aren’t. (The thicker the arrow, the greater the impact.) Typically, the collector car market responds to the following economic factors:
The stock market’s ups and downs will affect the market, but this mainly affects vehicles under $100,000. Be it because people are actually making money on stocks or because they associate the market with economic health, entry-level collector cars rise with the stock market. In other words, you might want to keep an eye on the Dow before you put your ’55 Chevy up for sale, but a Bugatti that’s been carefully stored for decades will probably sell just fine even in a bear market.
The price of oil, on the other hand, is piped throughout the collector car market. Even though everyday drivers appreciate when the price of oil falls, the oil industry employs a lot of people in the United States, Canada, and Mexico. Not surprisingly, some of those people spend their earnings on fun vehicles that consume what they produce.
Residential real estate has a very practical connection with collector cars: owning a residence makes it much easier to own a collector vehicle. Homes and collector vehicles also share many characteristics: high transaction costs, emotional appeal, and high maintenance costs. Every house, like every car, is unique, and they sell for a wide range of prices to everyone from blue-collar workers to the ultrarich. Two key differences: Nobody needs a collector car like they need a place to live, and houses can't be sold in another state or another country. So, if the real-estate market takes a dive, an effect might be that homeowners sell the classic in their garage.
Unemployment is a brake on the collector car market. People without jobs tend to own a vehicle for transportation and aren’t after a vehicle to fulfill their wants. You might think this, like the stock market, applies mostly to entry-level cars. Yet the effects of higher unemployment extends up the ladder—as customers spend less, business owners feel the pinch.
Auto loan rate increases also slow appreciation in the collector car market. That might seem odd, since the loans we’re talking about primarily apply to new cars, not classics. But the millions of people working for automakers, suppliers, dealers, and the rest of the mobility industry adjust their spending on enthusiast vehicles in accordance with the results of the new car market. Therefore, as lending standards loosen, or new car prices rise, values for collector cars often follow.
Understanding what factors have the biggest impact on the collector car market allows us to model some of the potential impacts of COVID-19. The stock market and the price of oil will likely have the most immediate impact, particularly on the under-$100,000 classics that have powered the market in the last year or so. However, vehicles above that $100,000 price point—think, cars that sell at Pebble Beach—or the parts of the economy not as closely tied to the oil industry, might see little change.
As with residential real estate, if the car isn’t highly leveraged, and there isn’t an immediate need to liquidate, values will likely be stable long-term. Unemployment and auto loan rates will likely have a more gradual impact on the market, and largely depend on how long the crisis lasts. If some semblance of calm returns in a few weeks, there’s no reason to expect significant job cuts or declines in auto sales.
So, if you can afford to hold on to your classic, there’s no reason to sell right now. If you take a long view, it might also be a time to buy. As always, we think the important thing is to buy what you like and drive it often. Given the times, we’ll add that it’s even more important to stay safe. Please follow the CDC guidelines so that we can avoid COVID-19 quarantines and infections and get back to driving.