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LONG LIVE THE BUBBLE – But Think of it Differently!

by | August 2015

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For generations, legions of enthusiasts have gathered cars of their era, vehicles they admired when they first discovered automobiles and when they first started driving. Market observers watched interest in 1960s muscle cars begin to grow again 20 years ago (after stock and investor car markets crashed). Fascination with 1970s cars soared soon after that. They have witnessed the intense pursuit of 1980’s cars in the past five years. Enthusiasts born in the 1980s have – in a few cases – reached the financial position to begin pursuing the early 1990s treasures with which they grew up. That bubble is just beginning to inflate.

But think of this in a different way, not as a bubble or balloon inflating or deflating, but as clouds streaming across a sky.

The great cars – of any description, any type – already are in great collections, curated and cherished by extremely passionate and deeply informed individuals who value these vehicles for their engineering, their design, and their craftsmanship. But as far as being an appreciating asset, for the most part, even these vehicles have passed their “Best if Purchased by…” date. Those clouds have moved across the sky.

The clouds have not dissipated. Prices are not collapsing. The high-pressure front of investment simply has moved on.

Successful sales – a 1976 Porsche 930 at $170,000 hammer price or a 1967 Ferrari 275 GTB/4 at $3.525M hammer price at Gooding & Company – represents a marriage made in heaven. The buyers, late to the party, validated the seller’s more timely investment. On the other hand, the sale may also relieve the seller of something he or she no longer enjoys or even wants, which may explain why a different Porsche 930 or Ferrari 275GTB did NOT sell at other auctions.

If you are buying now, it had better be because you love it, you always have wanted it, and – most importantly – because you are not borrowing from your future to pay for it.

As one long-time observer pointed out, “If you consider buying a car for one million dollars – which really is the entry point for serious collector cars – and if its value were to drop to $600,000 or $500,000, AND if that revaluation would effect your life – do not buy.”

That extends to the $150,000 Porsche 930 Turbo as well. If you’re acquiring for investment, the puffy clouds are hovering over the generation not yet able to afford the cars of their teens. You already have missed the high-pressure front that inflated the cars of the 1980s. And forget about anything before that.

There is an old axiom, typically applied to real estate and fine art purchases: “You never pay too much. You just pay too soon.”

In the automobile world in August 2015, it’s time to amend that: You can pay too much. Because you bought too late.

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