With supply constrained by already-sold-rental cars and demand from consumers unable to buy new vehicles without the necessary semiconductor chips, used car prices are up. Like, way up. Used car prices increased 21 percent year-over-year in April. In fact, used cars and trucks had the largest increase among all sectors in the consumer price index.
It’s also markedly larger than the 10.3 percent year-over-year increase in classic car values that we observed in the May 2021 edition of the Hagerty Price Guide. Of course, 10.3 percent is nothing to sneeze at—it’s the third-largest year-over-year increase since the guide was launched in 2006 and the first double-digit increase in a decade. Yet it is also only half that of the used car market. No way to sugarcoat it: The collector car market is underperforming relative to the market for used cars. Does that mean collector cars are worse investments than used cars?
Not likely. Collector cars and new and used cars rarely overlap in utility and demand—people buy Chevrolet Corvettes for entirely different reasons than they buy Luminas. But the markets might be closer than expected, and the spike in the used car values might be part of what’s supercharging the classic car market. Here’s why:
The first part of the connection is due to something called anchoring. Let’s say an enthusiast bought a used Corvette five years ago for $10,000. Ask them what price that same Corvette is today, and they’ll probably remember the $10,000 amount. Sure, it might be a bit more or less, but it will probably be closer to $10,000 than $50,000. Note that this is in nominal terms and not real (inflation-adjusted) terms.
Now, instead, say that same enthusiast heard first-gen Blazers are hot. They’ve never owned one before, though. Let’s also pretend they just shopped for a 2021 Chevrolet Tahoe; MSRP somewhere between $50,000 and $70,000. Suddenly, a 1970 Chevrolet K5 Blazer CST with a 350 cid V-8 in excellent condition at $67,000 seems entirely reasonable.
Consequently, anchoring on new and used car values, especially for vintage trucks and SUVs, suggests that enthusiast vehicle appreciation should track (nominal) appreciation of new cars and used cars.
The average (nominal) price of new cars and trucks in the U.S. has almost quintupled in the past forty years.
Anchoring also helps explain why values in mature sectors of the collector car market don’t change much, whereas up-and-coming sectors (trucks, 1980s and 1990s vehicles, and JDM cars, etc) that don’t have the same anchors change more quickly.
The second concept to keep in mind is substitution. No, enthusiast vehicles don’t have the same utility as new or used cars, but it might not matter for some people looking for a third or fourth vehicle. A 1970 Blazer in excellent condition might be a good substitute for a new Tahoe. A late-model example in the used car market would be a similar substitute at a lower price point.
Based on the Hagerty Price Guide, the number of vehicle generations with an average condition #3 (good) value less than the average MSRP for new cars and trucks remains fairly consistent.
That suggests that the overall collector car market follows new and used car market values; it neither gets too far ahead, nor too far behind.
So, the market for collector cars isn’t worse than the market for new and used cars, but understanding how perceptions in one affect the other helps set expectations about future appreciation.
What a new car offers in just about every area except perhaps the ability to repair and maintain it yourself is superior. Shortly those buying the collectible classic will be of the age that grew up not wrenching on cars so it is still a mystery why they would be is such demand and follow the upward pricing. Unless of course the “Coll look at me factor” is at play. I have known some that bought collector vehicles that didn’t have a clue about what was needed for upkeep and how to select a good example.
Comparing a 2021 Tahoe to a 1970 Blazer is like comparing Apples and Oranges The Blazer and Tahoe are both built by Chevrolet. The comparison stops there . I have a new Tahoe and my son owns a 70 Blazer The restomod blazer would not be good for A 1000 mile trip or longer. Used car values are up due to a true shortage of inventory in both new and used. I have been a car enthusiast all my life with 2 275 Ferraris and a 212 Vignale along with many 30s and 40 hot rods. Thank you Hagerty for this forum
I agree. That’s why I clarified the comparison making it a 3rd or 4th vehicle. If both are being used around town in a nice climate, it might not be such a clear advantage for the new vehicle.
Glad you enjoy the forum
Interesting comparison on the Tahoe and the Blazer. I’ll bet many of the buyers of the Blazer will soon regret it. I’ve had experience with newbie collectors either not knowing or remembering what it is like to drive a classic car, they expect a fully restored car to run and drive as nice as a new car, it won’t. I’ve gotten complaints about wind noise, cold start, etc that was just the way it was back then. A restored early Bronco is a hot commodity right now, but still drives like an old Bronco, rough riding and poor handling. The Blazer is not much better.
we might need to keep a wide market/buyer perspective and look at the full range of collectables v used (european, domestic, 80, 90 years of manufacturing). The buying population, the same. Enthusiasts may segment themselves around one make or model. More wealthy buyers – the whole market. When thinking of 3 or 4 car owners we look at particular owners w/special garages. These are not typical countrymen. Thinking of the whole buying public mean folk who don’t tinker, maintain, upgrade, have alot of knowledge. Just like the new purchase the choice is made on the basis of impression the vehicle leaves on the public the purchaser wishes to engender (or is made on themselves). The best way to gauge this is not just tracking recent purchases (year, make, model, condition, sales price) but also looking at what is out there in numbers of existing owned vehicles, their condition and onto current owners and future owners (“What are the top 3 models U seek? or “Is it only one model you seek?”, “What would help you sell?”, etc). Now we have some useful information. For someone like me, the hobbits (like to restore, restore w/modification) who buys low, improves to drive for free, and sell – this would be very useful information.
Impressive! Thanks for sharing this.