Data Driven

Economic storm clouds are starting to cool off the collector car market

by Adam Wilcox
17 November 2022 3 min read
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The Hagerty Market Rating continued its downward slide, dropping nearly a full point this month to its lowest value since February 2022.

We should start by reminding you that the Hagerty Market Rating is not an index of car values (we have plenty of those). Rather, it's a monthly measure of the "heat" of the market that takes into account, among other things, auction and private sales, insurance data, macro-economic factors (ie: S&P 500, inflation), and industry sentiment. All to say, a return to February 2022's rating does not necessarily mean that the past year's appreciation has been wiped out. It does, however, clearly reflect the fact that the feeding frenzy we witnessed during the summer is over.

Inflation has been one of the key factors weighing on the rating in recent months. This has the greatest effect on diminishing the high sales prices we've seen at auction. The current 12-month median sales price at auction is $34,560, the highest it's ever been. But, when adjusted for inflation, this metric ranks 18th all-time and does little to push the Market Rating upward.

Optimism from our industry experts is waning as well. While they still rate the market in the "expanding market" range on the 100-point scale, expert sentiment is at the lowest point since April 2021, citing rising interest rates and economic uncertainty as their chief concerns. The Case-Shiller U.S. National Home Price Index continues to slide, down three months in a row after more than two years of growth. The S&P 500 has fallen to levels not seen in nearly two years, and Gold has dropped to pre-pandemic levels.

Given all that bad news, it's notable that the car market itself remains as fundamentally strong as it is. Many segments seem to be consolidating the unprecedented appreciation we saw earlier in the year. The percentage of cars selling above insured value dropped back below 50 percent, but is still at its fourth highest value ever. Insured values themselves continue to increase across the board, although the ratio of increases to decreases on high-end cars dropped slightly this month, ending a 24-month streak of consecutive growth. But, to put this into perspective, for every one high-end car (above $200,000) where an owner decreases the insured value, more than five called to increase the value. This ratio is even more striking for the rest of the market (under $200,000)—for every person calling to decrease the value of their car, seventeen are calling to bump the value up.

Having said that, our key source of truth when it comes to what cars are going for is the Hagerty Price Guide, which after a boom during the pandemic is starting to taper off. The Hagerty Hundred (a weighted average of values for 100 most popular Year/Make/Models insured by Hagerty that are published in the price guide) continues to fall even as insured values climb.

Even vehicles in the price guide that continued to appreciate in many cases fell behind inflation. Although the average value for vehicles in daily driver (#3) condition is near a record high, when adjusted for inflation it's the lowest since May 2014.

Despite all the gloom, there's no question that 2022 has been an incredible year for the classic car market. After cars in much of the country are winterized and packed away for the season, owners will have a chance to breathe and reflect on a superheated year. Meantime, the Federal Reserve will continue its fight to tamp down inflation without taking the air out of the economy. Their success in the waning months of the year will surely influence where our rating sits when auction companies pitch their tents once again in January 2023.

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Comments

  • Jim Franks says:

    Yeah!

  • Scott McPherson says:

    The Monterey auctions faired well in the highest segment which was expected going in and the results confirmed that. The online auctions have proved instrumental at being in new buyers but after a number of good years that sustainability is winding down. When you see cars being re-listed after a year or even months the indication is those buyers drawn in by the ease of online buying have scratched the itch. Maybe the ownership costs in time and money became a burden or the interest was lost. I do believe online sales were good for the collector car hobby in some ways but it hastened the drop we are now seeing. The big market adjustment is a couple years off and that won’t be temporary. January will help with enthusiasm for the now but after that the permanent new normal will take hold. As covid and living for now mentality that helped spending continues to wain new interest and previous interest will no longer fuel sales. And the aging demographics will provide no relief. EV’s won’t help either. None of these comments are scientific but for enthusiasms it has never been scientific or data driven.

  • steve in podunk says:

    leverage isn’t nearly free anymore so an investment needs to make sense now

  • TomE says:

    So many misses by the Federal Reserve and the Biden administration have clearly made an impact. 2023 will be a very interesting year.

  • lagunatich says:

    Trees don’t grow to the sky. The US, like much of the world, has higher inflation than normal thanks to Mr Putin. However, the dollar remains very strong compared to the euro and GBP. Good buying opportunities overseas right now.

  • Gary Bechtold says:

    Printing and giving away money isn’t helping our economy. Having policies which just hurt the average person economically does not make sense. Still leaders around the world are doing things that are against us but they say it is for us. Until people wake up and hold them accountable this inflation is only the beginning of the greater problem.

  • MATTMERICA says:

    Yes, by all means, declare that the sky is falling. Looks like a “normal” market to me especially considering the wider economic markets. The PPP money has all been spent, the broad indices of stock markets around the world are down roughly 27%, and the crypto/ponzi BS is unraveling right in front of us. Don’t have a freakout

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