The Wiley Report

Are we approaching peak market? This car may give us a hint.

by John Wiley
25 February 2021 3 min read
Image
Photo by Barrett-Jackson

Like all of us, John Wiley loves cars. Unlike most of us, he also loves math, which is why he’s senior data analyst for the Hagerty Valuation Team. He takes a statistics-minded look at the collector car world for Insider.

Last week, Barrett-Jackson announced that a headliner to its March Scottsdale auction would be CSX 3015—the sole-surviving twin-Paxton-supercharged 1966 Shelby Cobra 427 Comp known as the Super Snake. Rare as this vehicle is, it’s not an uncommon sight at a Barrett-Jackson auction. The company sold it twice before, once in 2007 for $5.5 million and again in 2015 for $5.1 million

Both those years are now recognized as peaks of the collector car market. Is the reappearance of CSX 3015 on the auction block an ominous portent of a new market peak? 

Presumably, someone who spends $5 million on a 427 Cobra is an astute collector. What happens when, one day, that collector wanders by CSX 3015, looks at it and thinks, Now’s a good time to sell?

We aren’t implying that CSX 3015 casts a spell on collector car owners as it crosses the block, encouraging them to sell at any price and start stamp collections. It is reasonable, however, to wonder if the past owners of CSX 3015 have more information about the collector car market and the factors that influence it than most. Presumably, someone who spends $5 million on a 427 Cobra is an astute collector. What happens when, one day, that collector wanders by CSX 3015, looks at it and thinks, Now’s a good time to sell?

This sort of thing happens in other markets. Notably, in the weeks leading up to the financial crisis of 2008, two private equity firms (a rebranding of the corporate raiders of the 1980s), decided to go public. A private equity firm is an expert at assessing a firm’s value relative to its stock market valuation. When a firm is undervalued on the stock market, they buy it, take it private, restructure it, and make a profit. In 2007, two of these companies, KKR and Blackstone, looked at the stock market and decided, Now’s a good time to sell. Blackstone’s timing succeeded in that they sold a stake of their company to investors. KKR was a couple of weeks late. Its offering missed the market peak, and it postponed the sale until 2010. 

Much as we like to think everyone buys collector cars purely for pleasure, their owners are often encouraged to buy or sell based on the same murky boom-and-bust cycles that impact the broader economy. Leading up to 2007, values were swept up by the housing market. In the past decade, breaks on capital gains taxes encouraged a speculative buying spree that slowed considerably when the tax laws changed

Neither of those factors are at play in 2021, yet there are some parallels. The stock market is up again, despite economic devastation caused by the pandemic, with a handful of companies pushing the S&P 500 up 16.26 percent in 2020 to close at a record. Cryptocurrencies are increasingly popular and volatile. People might see a lot of digital wealth in their accounts.

That digital wealth has doubtless been finding its way into the collector car market of late. We haven’t seen the speculator-fueled spikes in values as we did in, say, 2015, or even more so in the late 1980s, but activity did increase in 2020, even as the economy ground to a halt. The growth of online auctions for collector cars is a happy coincidence. The intersection of unexpected wealth, boredom, and online engagement in the form of an exciting car auction could be a shot of nitrous for the car market. 

Does this mean we’re predicting that when the Super Snake sells in March, the collector car market will have peaked? Not really. For one thing, CSX 3015 has also sold at less suggestive times—our records show it changed owners in 1995, 2006, 2007, and 2009. It’s easy enough to think of innocent motivations to sell now: The present owner might have noticed that prices for Shelbys have, in the wake of Ford v Ferrari, been ticking up. Or they’re selling not out of a fear that values will drop but rather because they’ve finally accepted that prices for high-end cars have dropped from those 2015 highs and aren’t likely to return in the near future. Or, maybe, they’re just looking to make space in their garage.

Moreover, the collector car market, despite the buzz at online sales and the few in-person auctions, looks to be stable overall and largely has been for the past half decade. The various indices Hagerty uses to monitor the collector car market have been mostly flat or slightly down in recent months, and we haven’t seen a flurry of new auction records, as we did around 2015. Last but not least, it’s worth remembering that although the collector car market has peaks like any market, the valleys that follow tend to be shallower and shorter than what we see elsewhere in the economy.

Nevertheless, the reappearance of CXS 3015 on an auction stage serves to remind us all that prices are always fluctuating, and that the only guaranteed return on investment in a classic car is pleasure.

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Comments

  • Joe Melton says:

    One can make a lot of conclusions based on a single data point.

  • KLAUS KINDOR says:

    While it is true that financial indexes tend to have an effect on collector car pricing, perhaps the biggest single current factor is that collectors (real collectors who could afford these cars) are dying off AND the new generation of our millennial mental pygmy’s, could give two sh*ts about anything they cannot text on…..they can’t start a lawn mower for cryin’ out loud.

  • Scott McPherson says:

    Another bellwether component on the collector car market is the age demographic of those buying and selling. And what they are buying and selling. There is no denying the elephant soon entering the room is the electric car finding its way into the everyday lives of all age of drivers. Once the scale tips in favor of more everyday driver vehicles being electric than fossil fuel consumers, a choice will be made by drivers as to which consumer they want to be identified as; think wearing furs and eating meat.
    Nostalgia will be less of an incentive to play in the collector car market as the younger generation will not have that frame of reference. And for those of us who used to think vintage cars were better for a variety of reasons, those reasons are quickly becoming extinct. They aren’t faster, not easier to work on as new cars are reliable, and the looks are more odd than prettier these days.

  • bert moyen says:

    I think that the need for electricity will become too expensive if we go all electric . the fact remains we still need some type of fuel to operate these generators . also if you plan to have an electric car in this country when it gets to be too cold your vehicle would not perform properly and long enough for a long trip . it would take longer and how about the cost of replacing batteries ? how about the environmental impact of batteries in our landfill?

  • Edgar McKean, III says:

    I would be leery of going big into the collector car market just for investment purposes. For nostalgia, yes. With spare money that is not needed for net worth, yes. The problem is that there is little appeal to younger people who cannot identify with the era. They don’t want antique furnishings; they don’t want antique homes. As for cars, the appeal is for a vehicle that is simple and reliable, and ecologically popular. Sorry!

  • Kenneth Phillips says:

    Using any ” One Of” car as an indicator of the overall market is not a good idea. Especially this car that does not enjoy the international desirability of others.
    If when it comes up for sale there is enough intrest ( at least 2 buyers that want this car and can write $5 million checks ) to produce a new high price is pleasing but not a reliable indicator of new highs for everything else.
    Also, if those 2 buyers do not show up and the best bid collapsed it is not necessarily an indicator of all the rest of the automotive market.
    Bigger things are developing that can impact the market for collecting anything. Inflation/deflation of things resulting from the global virus and increasing serious military considerations resulting in changes in asset and currency allocation and values.
    Heads Up.

  • Peter Madison says:

    Or stop worrying about investment and buy the car you love, especially if inexpensive. I will never recover the ‘investment’ in my Jensen Healey, but running the Lotus engine to redline in a classic sports car seldom seen is more than enough satisfaction. Investors, especially those where you buy a share in the car, have been a detriment to the enjoyment of classic vehicles. Too many people buy classic cars for the wrong reason.

  • OldFordMan says:

    “Values” UP, Values down. It is all in the trend desires (except for the show-offs that would buy the Super Snake).
    Just a handful of years ago a very nice A-Model would set you back 30+; Now get it for 15. Even 50’s cars are slipping down while hotrod Subaru’s are posting high.
    Something has to be mighty special or one-off in most categories to hold and jump perpetually!

  • chrlsful says:

    “Another bellwether component on the collector car market is the age demographic of those buying and selling. And what they are buying and selling.”; “lota conclusions from one data set” etc, etc. I been on da fox bodyed stang for a few yrs’n C the opposite w/prices. ‘What pinical will U stand on” & what direction will U look in?”. I’m a low budget buyer. Seek what is interesting for me (& can buy) to drive free for awhile, fix up, sell to purchase the nxt exciting thing, “wash and repeat’ idea. 30, 40 yrs ago was the Itialian sports (’50s/60s alfa, lancia, etc) – can’t go there now…

  • Jim Rosenthal says:

    I buy cars because I like them, not as investments. Some have done well, but that’s beside the point. I DO feel we are overdue for a market correction- the overheated values of some Mercedes late model cars point to that. But selling a car is far more difficult than buying a car- so much so that I just keep what I have unless I can find a much better example of the same thing.

  • Steve Enderby says:

    Who here wouldn’t want to take that 427 Cobra for a spin but very few of us true enthusiasts have $5 mil to bid. For the rest of us no the market hasn’t peaked and there is still a bunch of baby boomers to keep the sport of driving and the hobby of collecting American muscle for another decade or two. Enjoy the ride.

  • Scott Haring says:

    If I received a postcard from a real estate agent saying, “One particular (expensive) house in your nation is being listed again–it might foreshadow a peak in market value of all homes…” I’d laugh all the way to the recycle bin. There may be some truth in this article but the dots are not connected; the conjecture was entertaining.

  • Glenn Stephens says:

    The world is rapidly leaving collector cars behind. Drive a classic car in a city outside the Midwest or Florida and you will be ignored, scorned, or pitied, especially by those under 50. I don’t know about one-offs with provenance like the Super Snake but when a few more boomers pass, the market for run of the mill Mustangs, Triumphs, and Cadillacs is going to run smack into the law of supply and demand.

  • Rick Carey says:

    Glenn,
    This is also a single data point, but last week I drove my 6-speed 2005 Pontiac GTO into the parking lot at Tractor Supply to buy bird seed. As I got out, I noticed the burble of a barely muffled small displacement engine. When I turned around there was a small pickup making the burbling noise and a kid (well, someone under thirty, which is a “kid” to me) with the window rolled down giving me a thumbs-up.
    It’s only one data point (in remotest northeast Connecticut at that) but it suggest to me that the thrill is not lost on young people.

  • Doc. Hall says:

    Bert Moyen hits the nail right on the head. If fuel oil, coal, other forms of gas and fuel are constantly growing in price the carbon foot print will grow for electric auto’s. Many of the newer gasoline autos are improving. The gas mileage on my Shelby GT-500 is much better than on my 1971 429 Torino Cobra. The list can go on and on.

  • Mark L Bedel says:

    One also has to wonder if this environment will have a residual affect on high quality replicas?

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