Economics 101

Are collector cars impacted by inflation? It depends on the car (and the buyer)

by David Zenlea
28 October 2022 3 min read
Image
Photo by Bring a Trailer

Inflation is most galling and apparent when it hits stuff that is supposed to be affordable. The $5 gallon of gas, the $5.55 Little Ceasars pizza, the $15.50-a-month Netflix subscription. Earlier this month, Bring a Trailer sold the vehicular equivalent in the form of a $5,775 “beater” Miata.

Relative to $200k Porsche 912s and $350k Mega Cruisers, the sum isn’t that impressive. In fact, it’s the least-expensive Miata sold on the popular platform this month. Yet when you consider the details—the car was an automatic with rust coming through the rear rocker panels—the mind reels. Ten years ago, this was a “$2500 OBO” Craigslist listing with a grainy rear three-quarters shot, the owner’s finger obscuring the license plate. Just three years ago, the Hagerty Price Guide would have pegged an automatic car in this condition (let’s call it a #3-, or a driver that needs attention) somewhere around $4000.

Bring a Trailer

Like that improbable $28 Taco Bell order you may have read about, there are confounding factors here. The Miata has been rising for a decade, and this one was on a platform known for attracting eyeballs and big bucks. Also, who doesn’t like Mariner blue? The Miata isn’t the only affordable car that has become markedly less so: The Hagerty 100, our index tracking values of the hundred most-insured vehicles in our price guide, briefly crested $50,000 during the summer, up some 25 percent from 2019.

In recent months we’ve wondered to what extent the widespread gains we’ve observed on the classic car market is appreciation versus inflation, and when buyers will (or should) blink. Affordable cars in particular show how complicated the answer can be.

Data from the Hagerty Price Guide offers some context: In the particular case of the Miata, values have generally kept ahead of price increases overall.

That makes sense since there's a lot driving up Miata values that has little to do with the general economy, including interest from younger collectors (Gen–Z now accounts for nearly 1 out of every 5 people who call Hagerty for a quote on one) and the simple fact that they're not as common as they once were.

In contrast, the Hagerty 100, which mainly consists of established classics like Ford Mustangs and VW Beetles, seems much more closely tied to the ebbs and flows of the greenback.

Even so, the very fact that their values have more or less "floated" with inflation is encouraging. Indeed, this is why the finance set recommends pouring money in tangible investments during inflationary times: at the very least, they tend to do better than cash stuffed under your mattress.

Of course, that assumes you have cash to spare.

"People on the lower end of distribution may be tempted to save more money—even though it's self-defeating [because the dollar is losing value]," explained Daniil Manaenkov, an economic forecaster at the University of Michigan.

This brings us to an important and harder-to-quantify aspect of inflation—how it hits you in particular versus someone else.

"In times of uncertainty and inflation, people at different income levels react to inflation differently," said Manaenkov.

Wealthy folks not only have lots of money; they typically own a lot of stuff—homes, art, wine, gold, and yes, cars—that insulates them from inflation. When the dollar depreciates, Manaenkov said, they often snap up more of these assets, both as a hedge against inflation and because they assume prices will continue to rise, and waiting will cost more. That helps explain why million-dollar classics, which were quiet for much of the pandemic, have gone wild lately.

For those on lower rungs of the economic ladder, things are not so simple.

"For people who are retired, these are probably fairly tense times at the moment," noted Manaenkov. "Once you're on fixed income, you either go back to work to supplement what has happened to your retirement account or you basically try to adjust your consumption."

Collectors still in the workforce may have more options. Younger workers in particular have seen big bumps in pay, which might mean more money in their pockets for, say, cheap Miatas. Might is the key word, as they face the same increases in basic living commodities as anyone. They also are more likely to rent, own fewer assets, and generally have smaller cushions in the face of uncertainty. Indeed, just about everyone short of the super-rich is sensitive to the unease that comes with inflation—not knowing, say, if gas prices will spike again come winter, as New York Times columnist Thomas Friedman speculates they might.

That generalized uncertainty, Manaenkov noted, is what might lead some collectors to pull back, even if they still can afford to pay higher prices. "People may be still may want [a classic car], it's just they they feel like the world is uncertain that they need to have a bigger safety buffer."

Indeed, the Hagerty 100, after nearly a year of strong gains, started pulling back over the summer, and even the Miata has paused its upward march for now. That said, a collector car, be it a $5500 Miata or a $5.1M Ferrari F50, remains a safe bet amidst inflation. Those interested in the former may simply have fewer chips to gamble.

A story about

Comments

  • John D Price says:

    I generally agree with the article. I sold a first generation Miata 1992 NA, with only 26,000 miles , factory matching hardtop in at least a #2 condition. One owner history in Florida it’s entire history . When the Miata went live I could see a softening of the market. She sold for $12500 I believe because of the economy pulling back. Had I sold the the car a few months earlier I think it could have easily brought in the $15,000 range.
    Lately I have been seeing many good buys and wish I had a bigger garage.

  • Gary says:

    Skipped through half of that Mumbai jumbo. Article could have been written in half the space.

  • Scott McPherson says:

    Supply and demand becomes a more acute economic principle in inflationary times.

    • Old Car Doc Rutledge says:

      Yea especially when it comes to needing something you can’t do without like a car for work and used cars are through the roof now because of the inflation and the insurance Companies don’t see it that way because my toyota got hit and they didn’t want to give me enough to get a replacement used car because the market was too high. Go figure ,their bluebook is not up to date at all . Inflation kills the used car market for a lot of people and I see more junk on the street now more than ever because of it.
      As far as classics go it cost more to restore one now for sure and that might have a bearing on it but most guys that have the money to but those cars are not bothered by a few buck more since they will buy what they want regardless of the cost . I think it has caused the classic car market to actually take a plunge to some extent as far as the less popular cars .

    • Old Car Doc Rutledge says:

      Yea especially when it comes to needing something you can’t do without like a car for work and used cars are through the roof now because of the inflation and the insurance Companies don’t see it that way because my toyota got hit and they didn’t want to give me enough to get a replacement used car because the market was too high. Go figure ,their bluebook is not up to date at all . Inflation kills the used car market for a lot of people and I see more junk on the street now more than ever because of it.
      As far as classics go it cost more to restore one now for sure and that might have a bearing on it but most guys that have the money to buy those cars are not bothered by a few buck more since they will buy what they want regardless of the cost . I think it has caused the classic car market to actually take a plunge to some extent as far as the less popular cars .

    • Tom Wright says:

      I tell anyone who listens that I could have lots on cash in the bank, (well lots more than I have in now) if I would just sell my old cars! But my wise 8year old said to me. ” What fun would that be”

      He’s correct!

  • Linton Manier says:

    I agree with Gary.

  • Michaels Collection says:

    I have watched as antique marques/ models of interest to me have increased dramatically (up to 50%) in 3-4 years. Ridiculous high prices extend beyond #1 or #2 examples to #3 cars. It seems those who want a particular model and have cash are willing to pay any amount at hyped up auctions. In a few instances, I inspect or arrange a car to be inspected at a live or online auction, only to find it is (at best) a #3 example but still fetches sell prices that were ridiculous a year earlier. Then everyone who has one wasting away in a barn or warehouse puts “lipstick on a pig” and wants to sell for crazy money. That’s ok, I’ll wait… Meanwhile, I could sell a couple of cars I have now for double what I paid, but which one(s)? I love all the cars I have now, and yes, I drive them!

  • jane don says:

    So much in society has changed-But stayed the same- Greed has become normalized (even Admired)– instead of donating to help the poor they are selling used clothing ect ect online– There is more inheritance than ever before–This is extra money folks didn’t have to work for– much like winning a lottery– Free money changes people– & rarely for the better- Expectations rise–Instead of buying that Beginner home they’ve got to Start with that very nice updated home–The same for classic cars–so the less desirable ones get left by the wayside (not going up in Value the same %age as the more popular cars)–In the long run this could be a bad thing because more & more folks are dirt poor & couldn’t even Dream of having a car for transportation let alone a Collector car– As there are fewer potential buyers prices could drop–something terrible –

  • Gary Bechtold says:

    If you are someone who has to finance something you are starting to rethink things. If you are buying cash you probably don’t care.

  • Gord says:

    Brilliant article!

Leave a Reply

Your email address will not be published.

More on this topic

Hagerty Insider Newsletter

Your weekly dose of auction reports, market analysis, and more.

Thank You!
Your request will be handled as soon as possible
Hagerty Insider Newsletter
Your weekly dose of auction reports, market analysis, and more.
Share