Despite some warning signs from the economy, the Hagerty Market Rating, our holistic metric to measure the heat of the classic car market, has jumped another three points in the last three months and hit another all time high.
Feeling déjà vu? Us too. Earlier in the year we reported that the Market Rating hit a new peak after a period of accelerated growth during the pandemic. We noted then that the rating is designed to be hard to move into super hot (or super cool) territory: One Bring a Trailer record won’t peg the needle. The fact that it’s still rising thus reflects multiple factors.
One of the most influential metrics of the Hagerty Market Rating is auction activity, which is currently at an all-time high. Obviously, we've all seen median sales prices skyrocket after the financial panic of the pandemic cooled, but it's the other part of auction activity—the number of cars sold—that is almost off the charts. Literally. The current value is 99.48, which leaves almost no room before the metric is maxed out to 100.
The primary driver of this is the relatively recent growth of online-only auction platforms. Prior to just a few years ago, the only way to buy a classic car online was eBay motors. Otherwise, you had to schlep to one of the in-person events. Now, dozens of different online-only auction sites rival the volume of the big-tent sales. For example, Mecum is auctioning off about 2500 cars this week in Indianapolis. Bring a Trailer does that volume every month, continuously, and many other sites are catching up.
The incredible volume in the past quarter likely also reflects seller sentiment. With the summer driving season here, owners of classic cars were faced with a choice: sell while the market is high or keep the classic. Many chose to sell and turned a profit as the ratio of cars selling above their insured value a hit record high. Owners who chose not to sell, took note of the rising values and increased their car's insured value— a trend that's been growing since summer 2020.
Of course, value is also part of the Market Rating, and is indeed still rising. The average value of the Hagerty Hundred, or the 100 most insured vehicles in the Hagerty Price Guide has been increasing steadily for over two years to its new all-time high. Rising values are great for owners but can discourage new collectors from entering the market.
Last but not least, our Market Rating attempts to quantify sentiment from industry experts. Veteran classic car dealers and the like often spot trends before they show up in hard numbers, so we're constantly in conversation with them. What we're hearing these days is continued optimism but also some wariness, citing the economy as the chief concern. Inflation is at the highest point since the Market Rating began in 2006, and that impacts the cost of car ownership. As the Federal Reserve raises interest rates to combat inflation, it will likely kick off the inevitable slowdown of the classic car market as many collectors finance their new acquisitions.
Since we are in the midst of the hottest car market in decades and because the Market Rating uses a 12-month rolling average for many of its 15 metrics, it is unlikely that the Market Rating will reverse its upward trajectory anytime soon. However, after 14 months of consecutive growth momentum appears to be slowing. When and by how much it will drop remains to be seen.