Market Newsletter, Q4 2022

by David Zenlea
30 November 2021 6 min read

Some circular logic to guide your collecting in these volatile times: Classic cars make great investments precisely because they aren’t, conventionally speaking, great investments.

Bear with us, we’ll explain.

In the past year we’ve seen assets of all kinds take a beating. The stock market, understandably, gets most of the ink, but the truth is the pain has spread far and wide, including to many so-called alternative investments. Crytopcurrencies’ total market capitalization has fallen some 70 percent compared to a year ago. High-end watch values, which had been flying high through much of the pandemic, are down nearly 20 percent in the past six months, according to the index WatchCharts. Sneakers? Not so hot, reports the New York Times, especially if you’re trading in Yeezys.

It’s only natural, amidst such headwinds, to wonder if collector cars might be next in line. We wondered this ourselves last summer, in the runup to Monterey Week. Then people went to the peninsula and bought some $469M in cars. Since then, we’ve seen someone drop $14.87M on a Michael Schumacher-driven Ferrari F1 car and more than a million on a pile of parts connected to Roger Penske and Bruce McLaren. Even as in-person auctions return to pre-pandemic strength and then some, online auction platforms, which now include our own Hagerty Marketplace, have grown more than 50 percent compared to last year. With two months to go, 2022 has already surpassed every previous year for classic car auctions. (Yes, that’s true even when you adjust for inflation).

What gives?

One secret may lie in all the “problems” cars present for the purely money-minded: They cost a lot to store; they require constant and at times expensive upkeep; and even amidst the growth of online auction platforms, they remain much harder to trade than art, watches, or sneakers. Most important is the fact that although collector cars tend to grow in value steadily over the long haul, they typically don’t provide the sort of quick returns that would move a comma in a hedge fund manager’s year-end bonus.

That leaves the collector car market predominantly to people who, you know, like old cars. The average Hagerty policy holder has been with us more than six years—an eternity in Wall Street terms. The vast majority of these people own their cars outright. Of course, collectors aren’t perfectly rational in how they spend—we’ve all seen a $200k restoration on a $100k car. Yet a classic car will always retain real and intrinsic value, utterly disconnected from the ups and downs of the market.

Does all that mean car values will continue their upward march into perpetuity? Of course not. In fact, we can see signs that appreciation, at least in some segments, is already slowing. And these are, make no mistake, uncertain times: Pandemic, Inflation, war, a two-year-long presidential campaign. If someone tries to pitch you a “can’t-lose” investment amidst all that, run the other way.

We put this newsletter together no in order to pitch you anything but rather, to keep you informed. In such a climate, it pays to know exactly what you’re buying and what the prevailing conditions are. In this issue we’ll take you through some of the metrics we at Hagerty use to keep tabs on the market and we’ll dig into how collector car values correspond (or more precisely, don’t correspond, to economic cycles). We’ll also look back at 2022, which will go down as the strongest year, ever, for classic cars, and zoom in on a segment that outpaced the rest of the market.

Yet the upshot is that classic cars remain among the least risky places to store money—precisely because the vast majority of collectors don’t view them merely as a place to store money. They’re buying what they love within their means, and they won’t flee the minute prices tick down. Play by those rules, and it’s hard to go terribly wrong, no matter what 2023 brings. —The editors of Hagerty Insider

Data Deep Dive: Is the market cooling?

We see the question all over forums, Facebook groups, and comments on Hagerty Media websites: Is the collector car market finally cooling after 24 months of unprecedented growth? It’s easy to point to a record price here or a killer deal there as evidence either way. Yet the direction of an entire market—more than 30 million vehicles worth roughly a trillion dollars—is bigger than a few sales. That’s why Hagerty Insider exists. We spend all day, everyday reporting on and writing about the collector car market, backed by full-time analysts who study millions of transactions, both on the insurance side of our business and at auctions. We slice that data into a variety of tools to monitor the collector car business. We’ll walk through several of them here to answer the question everybody is asking.

Hagerty Market Rating
Collector cars are still hot…but inflation is a cold shower

What it is: Our market rating, updated monthly, quantifies and tracks the momentum of the market. It pulls from all our data sources and also factors in external economic metrics.

What it's telling us: The Market Rating has been at or near record highs for the entire year but has slipped the past few months. That largely reflects the impact of inflation on collector car values. For instance, the current 12-month median sales price at auction in November was $34,560, the highest it's ever been. But, when adjusted for inflation, this metric ranks a much-less-impressive 18th all-time.

Hagerty Price Guide indexes
Parts of the market are cooling...and other parts may just be heating up.

What they are: Chances are you've looked up a car value in the Hagerty Price Guide. That same guide, updated quarterly, also powers stock-market-like indexes that give us a sense of how various segments of the market are performing. Each index averages price guide values of several representative cars over time.

What they're telling us: The obvious trend, from all the indexes, is up. Most are at or near all-time highs. Yet it's worth noting that the rate of growth for affordable cars and muscle cars has recently leveled off even as Ferraris and Blue Chips (our shorthand for the most sought-after high-end collectible automobiles of the post-war era) have surged. Again, we can point to inflation. Amidst rising prices, ordinary consumers—the sort who might buy an affordable classic—tend to reduce their spending. High-net worth individuals, on the other hand, typically snap up hard assets, like seven-figure collector cars. Don't be surprised if that trend persists into 2023.

Repeat sales

If you bought the best, you’re doing just fine

What it is: A key challenge in monitoring the collector car market is the obvious yet profound fact that what sells one day is completely different than what sells the next. Imagine trying to understand fruit prices by tracking a stand that sells apples one week, kiwi another. That's why we love repeat sales. When a vehicle whose VIN we've recorded at one auction sells at another, we're able to get an apples-to-apples comparison of price changes over time.

Our favorite model, for these purposes, is the venerable Mercedes-Benz 300SL. It appears frequently at auction, and has consistent, easy-to-track chassis codes (not a given on pre-1981 vehicles). And because the 300SL has been considered collectible for many decades (unlike, say, a Nissan Skyline GT-R or even an air-cooled Porsche 911), we can look at how repeat sales have fared over the long haul.

What it tells us: The Smart Money that bought the best is still smart.

The 300SL repeat index didn't tick up as sharply as our other instruments, and has been cooling since January. That may sound odd given that other metrics, including overall auction sales and even the average price of all 300SLs at auction, were going gangbusters at this time. Yet it's quite possible those figures are misleading. When sellers perceive the market is hot, a lot of "new" cars come out of the woodwork—think barn finds or sales out of major collections. These cars often achieve big prices at auction and further fuel the impression that the market is on fire. In other words, they're kiwis. The apples—the cars that have been bought and sold before—achieved far less spectacular results.

The glass-half-full view here is that the high end of the collector car market has been quite stable. The historical view afforded by the 300SL index tells us that's likely to persist. Over the past twenty-five years—a span that includes three recessions and more than one Black Swan event—Gullwing values have experienced ups and downs, but no wild nose dives.

2022 by the numbers: What the heck just happened?

No matter how you look at 2022 auctions, one thing is clear: They were extraordinary.

Total sales

Online and in-person auctions together exceeded more than $3B. To put that in context, the record from the previous decade, 2015, was just over $1.5B.

Top sales

The headliner was no doubt the Mercedes-Benz 300SLR, which at $142M, more than tripled the previous record achieved by a car at public auction. Yet it wasn't then only standout.

Most valuable brands, 2022:

Biggest Price Guide movers, By the Numbers [tk]

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