Data Dive

Inflation is accelerating past classic car appreciation

by Adam Wilcox
20 July 2022 2 min read
Photo by Cameron Neveu

After 15 consecutive month’s of growth, the Hagerty Market Rating has finally reversed course, dropping 1.42 points in the last month. This is the largest drop since the start of the COVID shutdown in April 2020. Just like then, the drop was spurred on by macro-economic factors more than events within the collector car market itself, yet there are signs that the period of unprecedented appreciation are coming to a close.

The Hagerty Market Rating, as we've explained before, measures the "heat" of the collector car market by looking at data points within our world—auction sales, Hagerty Price Guide values, insurance data—and beyond it. It's the latter that really dragged down the rating this month. Macro-economic indicators used in the Market Rating are at their lowest point in more than a year, pulled down primarily by the S&P 500 and price of gold. The US Home Price Index and Total Retail Sales are both slowing as well. But the biggest factor is—you guessed it—inflation, which just accelerated to 9.1 percent in June 2022, the highest since 1981.

The relationship between collector car values and inflation is complex. Some of the appreciation we've seen in recent months no doubt owes to the factors driving inflation elsewhere in the economy, including huge demand and supply shortages. Yet classic cars, like other tangible assets, have also no doubt seen investment from people hedging against inflation—if your money is growing less valuable by the day, why not park it in something that tends to grow in price over time?

On the whole, classic car appreciation over the last year has outpaced inflation. Until now, it seems. The Private Sales Activity portion of the Market Rating, which is comprised of the average sales price between private parties and the percentage of cars that sold above insured values, increased in absolute terms but dropped when adjusted for inflation. The story is the same with Auction Activity, which dropped a full point even though the number of cars sold is at a record high. The median sales price dropped just slightly from its high two months ago, but when adjusted for inflation, it's the lowest since October 2020.

Although the market has dipped, classic car prices remain high. Nearly half of cars are selling above their insured values and collectors are compensating by increasing insured values across the board. A good way to visualize this is to look at the Hagerty Hundred, a weighted average of Hagerty Price Guide values for the 100 most insured vehicles. The 0.2 percent drop in the Hagerty Hundred after the July 2022 edition was barely felt after the 27.7 percent increase from the start of 2021 to April 2022.

Expert Sentiment, which we measure by asking industry insiders to rate their confidence in the market from 1-to-100, also remains optimistic on the whole, despite dropping to its lowest point since October 2021. Consumer confidence appears to have has held strong through some economic uncertainty. How this will carry over into the Monterey auctions next month remains to be seen.

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  • David Martinelli says:

    Where can I get a better picture and more information about the 63 Impala called RUBY?

  • Jg says:

    “…inflation, which just accelerated to 9.1 percent in June 2022, the highest since 1981.”

    Ha! “9.1 percent” is political propaganda plain and simple. In my world, this is more like 50%+. Gas prices and building supplies are the ultimate economic indicators…

    • Coop says:

      So the FRED (Federal Reserve Economic Data)  is “propaganda”. What’s “plain and simple” is your opinion. Doesn’t mean it close to correct

  • Joe says:

    “…inflation, which just accelerated to 9.1 percent in June 2022, the highest since 1981.”

    Ha! “9.1 percent” is political propaganda plain and simple. In my world, this is more like 50%+. Gas prices and building supplies are the ultimate economic indicators…

  • Paul D says:

    Inflation is a two edged sword. It makes cars more expensive to buy while eating away at one’s ability to purchase. If you are a buyer, this isn’t good news. While I have the cash to buy, I’m sitting it out for a while and waiting for some sanity to return to this market.

  • Don Walker says:

    I agree with Paul D. I’m on ‘the sidelines” until we see some signs of stabilization.

  • Maestro1 says:

    I’m with Paul D. I’m watching the hysterical Press and General Circulation Media and the whole thing is nonsense. And Jg is right; It’s all BS when faced with the daily outrage of fuel and other costs. I’m asking
    all in the Community to sit on your cash and/or financing and force market prices back to reality. Don’t walk
    away from the Hobby, walk away from the prices. Sit still. Pay your Hagerty Premiums, or whoever you are with. You are in a Seller’s market. If you have something to sell, do it now. Whatever number you have in mind as a sale price take 15% off of that as your top price. Let me remind you that a lot of America is broke. Your market is more affluent, so money is easier here than in other markets. Take the cash and sit on it. I have been talking about correction in this and other markets for a year now and finally some people are listening.
    I have been in the Hobby since I was 10 years working with my father on cars we loved. I am now 84 and still at it.

  • Anthony Russo says:

    In a serious economic downturn, which I expect is at its beginning stages, the assets which are wanted, but not needed, are the first to be sold. Second homes, airplanes, boats, collector cars, etc. are vulnerable to price deflation. I sold mine recently, hoping for a better place to re-enter later.

  • Jim Rosenthal says:

    Good time to sell- not a good time to buy. Unless you are so rich you don’t care, this is a good time to wait it out, tune up the cars you have, and watch the market. I have a wish list like all of us do, but right now I don’t expect to acquire anything on it. Unless that locked garage down the street turns out to have a Gullwing in there, and I get it for 113 prices.

  • Michael Heroy says:

    When I see the talking heads going on about inflation, I want to scream, “compared to what?” at the TV. Calculating the increase in prices from the artificial bottoms pf the Covid years makes no sense. It is more accurate to compare them to a longer term that throws out the Covid period as an anomaly, in which case the figures aren’t that bad. We might want to remember that gas was over $4.00 before travel declined during the pandemic and most likely would have stayed there had demand not dropped precipitously as we all stayed home.

  • Joseph Perry says:

    How many people do you know that collect Classic cars? I know over a dozen. With few exceptions, they buy them as an investment and ego. The increase in price is because of the number of people that have incomes above a few hundred thousand a year.

  • John Burke III says:

    I have been living off of my wish list for the last 30 years with the art of the chase and search being the most enjoyable part of the acquisition of the car. My wallet is now closed. Like musical chairs those who bought who really could not afford to lose value are going to be left holding the bag.

  • Kevin johnson says:

    If your talking about buying a 70 chevelle for 50k and selling it for 65k is the economy crashing you might want to step up your game on finding the car you want they are out their just not at a dealership or an Auction house where they sell for 30% higher than they should look for the right price and when you find it buy it !

  • timf says:

    Relating inflation to classic cars or other collectibles is not realistic. It is discretionary income that is being used for the purchase. The supply and demand side of collecting becomes demand – there has to be more than one buyer willing to purchase at their price. Then, especially in auction situations, emotion can become involved. As the macro market unwinds, it is going to be buyer’s comfort level with purchasing something that is not a necessity as prices for commodities settle and the markets stabilize.

  • Johnny D says:

    I’m in a car club, we have 75 members, a lot of them have multiple cars. They don’t buy them for ego, or investment. We buy them because we love classic cars. It’s a hobby and it’s fun.

  • John McGrew says:

    Actually, we’ve been watching inflation for a very long time. It started roughly a decade and a half ago when the Federal Reserve set interest rates from a historical nominal to near-zero in the wake of the ’08 crash. The mass amount of liquidity that resulted bypassed its intended target of “main street” and instead landed on Wall Street, boosting the price of equities. Consumers at the time didn’t so much notice inflation for ordinary goods because of the increasing flood of cheap imports from China. Concurrently, the fracking revolution kept energy costs relatively low. After equities got boosted (inflated) beyond all reason, the very wealthy, still flush with cash then started bidding up the prices of other classes of comparatively rare items, such as art and eventually collector automobiles.

    But now that energy costs have boomeranged and the disruptions rippling from the COVID lockdowns working their way through the global economy, we now see inflation at all levels. (Energy affects literally everything)

    Are collector autos in a bubble? Probably. But no more so that a lot of other classes of assets.

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