12 July 2005

Where Have All the Cheap Cars Gone?

The first issue of SCM roared off the presses (or more accurately, was spit out of a mimeograph machine) in 1988. We were just in time to ride the upsurge in the market through its crest in early 1990.

I was buying and selling sports and imports at the time, and day after day through February 1990, my fax machine kept spitting out orders from European clients. Selling nearly anything wasn’t the problem; finding something to sell was.

One of my favorite deals was a Daytona, located in New York , which had burned to the ground. The carburetors and distributors were completely melted. I sold it with a phone call for $115,000 – I think my commission was $10,000.

And then there was an Alfa 6C2500 that I pulled out of a barn in Vermont . Or, more accurately, it was pushed out of a barn by a tractor that caved in the trunk in the process.

It was mostly complete and not too rusty. I convinced the seller to part with it for $25,000 (in cash, of course, hand-delivered after an all-night flight from Portland, OR) and sold it the same day for $50,000 to a good friend who told me he had long been looking for a restoration project just like this. A half an hour later he sold it for $85,000. It still has not been restored.

I remember a Giulietta spider I found in southwest Washington state. Both front fenders had been cut off, exposing the front suspension and wheels. The owner had used it to herd cows and sheep on his property, and there were bits of wool stuck in the front grill. I think I shipped it to Holland for around $10,000, as part of a six-cars-stacked-in-a-40-foot-high-cube-container package.

With the values of cars so high, projects that had lain dormant for years in garages, behind buildings, or out in fields acting as homes for squirrels and mice suddenly became valuable. Of course, the crash of late 1990 brought all of that to a halt.

RESTORED EXOTICS, NO WAITING

One result of the crash was the large number of over-restored cars available to collectors. In a classic case of supply catching up to and then surpassing demand, Jaguar XKEs and similar cars that had been going for $125,000 or more were suddenly sale-proof at $60,000.

So for the past 15 years, you haven’t had to work too hard to be first in line if you decided to own a restored Maserati Ghibli, or a Ferrari 250 PF coupe, or even a perfect Alfa Giulietta Spider. Buyers willing to pay “above market” were few, and all of the bargaining chips were in your hands.

But those days have come to an end.

Today, the best-restored cars of every marque are being snapped up at ever-increasing prices. While we have seen this occur in the ultra-exotic market for some time (think Ferrari SWBs and Aston DB4s), these value increases have now trickled down to more ordinary models, such as 330 2+2s and E-type coupes.

250 GTEs that were a hard sell at $50,000 just six months ago are now considered a buy at $75,000. There’s no such thing as a very nice TR4 for under $10,000, and even at $20,000, a mind-boggling price (at least for notoriously tight-fisted Triumph owners), our analysts can call a TR6 “well bought.”

SHAKY STOCKS AND A GLOBAL BAZAAR

There are a few reasons for this. First of all, just as in 1988 and 1989, the stock market has become extremely uncertain. Analysts aren’t sure whether the Dow-Jones is more likely to hit 11,000 or drop to 9,000. Second, interest rates continue to be at or near all-time lows, making it almost free to finance a collector car. Lease companies, led by Putnam and Premier, are making it easy for businesses to expense owning a collector car and to trade from one car to another with relative ease.

Further, given the ever-increasing costs of labor and parts, restored cars have been selling for so far below replacement costs that they were simply too cheap. If it will cost a minimum of $20,000 to restore an MGB to excellent but not concours-winning condition, it only makes sense that their market values will percolate up to that level and then beyond.

The final component of the general price increase for common classic sports cars has been eBay. This international gearhead’s bazaar has put cars in front of a global audience. Whereas someone trying to sell a 1967 Alfa GTV in 1995 might have watched it languish in his local newspaper, or sat waiting by the phone for a call from an ad in the Auto Trader, today within a matter of minutes it can be listed on eBay, with a complete description and a multitude of color pictures.

A seller in San Diego can suddenly have his car appear before a buyer in Chicago , who otherwise would have had no idea it even existed. And if a similar buyer in Nashville suddenly decides to pay what it takes to own this GTV, its value can go from a local $8,500 to a nationwide $17,500 with just a few keystrokes.

This overall increase in prices for restored collector cars is here to stay. No one is buying a 1967 MGB-GT to use as a daily driver anymore; all of these 30- and 40-year-old cars are now weekend toys. Classic sports cars from the pre-1974 era have nearly completed the transition to pure collectibles, and consequently buyers are prepared to pay more than the casual users who used to be the primary market.

This doesn’t mean you should shop stupid and pay too much for an improper or badly-done restoration. But it does mean that if you come across a true #1 or #2 car, looking at a price guide from six months ago may not tell you the entire story. Be prepared for some sticker shock, but also be comforted that replacement-cost logic would dictate that these cars, if properly maintained, will never go down in value.

 

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