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Market Insights, January 2011

January 24th, 2011

Market Insights, January 2011

Insights from Bruce and Spencer Trenery, written by Derek Tam-Scott


In early 2009, not quite 2 years ago, we wrote to you describing the correction in collector car values that was then occurring. Those of you who have been following the market are no doubt aware that values did come down some (markedly in some cases, but not catastrophically as in 1989-90), and those of you who have bought or sold cars since the end of 2007 are aware that it has been very much a buyer’s market. Nevertheless, we have continued to transact a significant number of cars at Fantasy Junction during this period, and this has given us unique perspective on the market’s health and activity.

 

We are pleased to report that we have observed some encouraging trends in the collector car market in recent months. In summary, we have seen both the level of activity and the values of cars increase, and we feel that now is a better time to sell cars than it has been in some years. Buyers are feeling more financially stable, and indeed, many of our clients have reported that their portfolio of equities and other assets has returned to the same values as prior to the 2008 credit crisis.  Additionally, many of our clients are concerned about inflation in the coming years, and see collector cars as concrete assets that can be transported and converted into a variety of currencies, and whose values will appreciate at rates equal or better to inflation.  Therefore, buyers of collector cars are less hesitant about purchasing cars, and as a result, they can no longer afford to be as opportunistic because increasingly, hesitation means missing a chance to own a particular car.  

 

On the flip side, sellers are on the whole enjoying less aggravating and more rapid sales, particularly of high quality examples of cars.  The recent auctions in Scottsdale, Arizona have reinforced our assessment of the collector car market’s good health.  Many individual cars did extremely well, yielding prices that approach or even exceed 2007-2008 levels.  Overall auction performance was very strong too, with Gooding and Co. selling 121 of 129 lots (93.8%), and RM selling 172 of 180 lots (95.6%), both exceptionally strong figures.


While we have seen increased activity across the board, it is, as ever, the highest caliber cars that are the most saleable. The cars need not be expensive or exotic, simply a very high quality example. Unrestored, original, preservation-type cars are particularly sought after as the cars become increasingly difficult to find, and as collectors become increasingly aware of the absolute unrepeatability and beauty of such cars. It is no longer possible to precisely specify the premium associated with this type of car as a percentage, as oftentimes, such cars are worth multiples more than a restored example. Additionally, high quality restoration work continues to be valuable to buyers, as does usability.


Consequently, it is a great time to be buying or selling a collector car. If this market trend continues, then buyers will only become more numerous and competitive, making it a great time to buy. Alternatively, for sellers who have been hesitant to sell their cars because of concerns about the market, now is a great time to take advantage of the recent buying activity, and an associated vacuum of cars available in the market. At Fantasy Junction, we have sold an unusually large number of cars in recent weeks, and are finding that our level of stock is noticeably lower than usual. Consequently, if you are considering the sale of one or more of your collector cars, we would be delighted to consign your cars or perhaps even buy them outright.

The timing to sell is particularly good now because the start of the event season is coming, and buyers are looking for cars to use in races, tours and rallies this year. Furthermore, the Euro has strengthened, which has brought more European buyers to market, and additionally, capital gains taxes continue to remain low. Lastly, since it is near the beginning of the year, it is a great time to sell in the event that it is necessary to recognize a gain on a car since it gives as much time as possible to use the funds prior to paying taxes.

Our recent discussions with our clients and friends, both virtually and in person at our showroom and in Scottsdale, have reinforced why we have been in the collector car business for thirty-five years. In addition to the pleasure of interacting with such extraordinary cars on a daily basis, it gives us great satisfaction to forge meaningful long-lasting relationships with our clients, many of whom we can now call friends as well. What we pride ourselves most on at Fantasy Junction is our reputation for integrity, transparency, and expertise, and we look forward to facilitating your next collector car transaction.