Making sense of January’s collector car auction results

For once, the takeaway from the January 2018 collector car auctions isn’t about record-setting totals. In fact, just as we saw in Monterey last August, the preliminary results from the handful of Arizona auctions (according to Hagerty) show totals down from 2017 — in this case, to $247.8 million from $259.8 million. Meanwhile, Mecum’s Kissimmee, Florida, sale, which took place just outside Orlando earlier this month, saw a preliminary total of $96.6 million in sales, slightly off from its eagerly sought $100 million target but still a big $10 million boost over 2017’s figures.

Nor was the narrative about records smashed by those seven-figure (or eight-figure) cars most of us can only dream about owning. There were plenty of those, of course, as well as plenty of high six-figure cars that remain fantasy garage material. (Heck, low, medium and high five-figure cars are in the same unattainable territory for us at the moment.)

The big story, though, was the lower and middle ends of the market flexing their wallets and/or credit even as the upper crust took a measured step back.

In some respects, this was the continuation of a trend. We’ve seen a decreasing appetite for really pricey cars for a while now, unless they are exceptionally rare examples and/or have a unique history and impeccable provenance — cars like that will always find eager buyers, as Preston Tucker’s personal Tucker 48 sedan (sold by RM Sotheby’s for $1,792,500) demonstrates. Other premium cars rolled across the block without meeting their reserve, which bit mightily into the overall sales figures.

This 1954 Jaguar D-Type offered by RM Sotheby’s, along with a 1956 example of the breed offered by Gooding & Co., failed to sell in Arizona this January.PHOTO BY PATRICK ERNZEN COURTESY OF RM SOTHEBY’S

Is the so-called smart money edging away from a super-heated market? Perhaps, but there’s another angle to consider: The recently passed United States tax code overhaul. Specifically, the new law limits so-called 1031 exchanges, which allows individuals selling certain assets to reinvest proceeds from the sale into similar assets without paying taxes on the sale.

You’ll still be able to do that with real estate, for example, but not art or classic cars. So if you sell your Duesenberg to buy a Bizzarrini — and really, who among us hasn’t been there — you’ll have to pay tax on the profit realized on the Duesenberg first. If you really want to get into something new and have the cash to spend, the new rules won’t stop you. But if you treat classic cars like investments rather than cool, fun things to enjoy, you might think twice.

It is unclear how large an impact this will have on the upper end of the market, but if January’s results are any indication, it could be awhile before we see another astonishing string of record-setting car sale prices. Sales focusing on higher-end vehicles, like the Amelia Island auction and the Monterey Car Week auctions, should give more insight. And, of course, this won’t do much to keep international investment-minded buyers off the field.

Meanwhile, the bulk of the market — perhaps buoyed by the stock market’s prolonged winning streak, generally positive domestic economic indicators and a business-friendly regulatory environment — is buying with gusto. That’s ultimately what kept January’s sales healthy.

To illustrate this diverging market, look at the top-10 sales from Arizona (per Hagerty):

1. 1965 Ferrari 275 GTB Speciale Coupe sold for $8,085,000 (Gooding & Co.)
2. 1958 Porsche 550A Spyder sold for $5,170,000 (Bonhams)
3. 1954 Ferrari 500 Mondial Spider sold for $4,455,000 (Gooding & Co.)
4. 1931 Bugatti Type 55 Roadster sold for $4,070,000 (Gooding & Co.)
5. 1966 Shelby Cobra 427 S/C Roadster sold for $2,947,500 (RM Sotheby’s)
6. 1972 Ferrari 365 GTS/4 Daytona Spider sold for $2,640,000 (Bonhams)
7. 1967 Ferrari 330 GTS Spider sold for $2,530,000 (Gooding & Co.)
8. 2017 Ford GT Coupe sold for $2,500,000 (Barrett-Jackson)*
9. 2014 Pagani Huayra Coupe sold for $2,090,000 (Gooding & Co.)
10. 1948 Tucker 48 Sedan sold for $1,792,500 (RM Sotheby’s)

Mecum’s Kissimmee top-seller was a 2015 LaFerrari, which went for a whopping $3,410,000; none of its other big sales would have cracked that list.

Note that the car at the very bottom of last year’s Arizona top 10 was a ’31 Alfa Romeo 6C 1750 Gran Sport Spider, which went for $2,805,000 — a full million more than the Tucker at the bottom of this year’s list. Maybe some number of megabucks lots were simply not offered in Arizona this year; they might be sold at other events, or sellers might refrain from consigning them in the face of a softening market. Of those that were offered, more than a few, like a pair of Jaguar D-Types offered by Gooding and RM Sotheby’s, failed to meet reserve prices.

Despite this, the average sale price in Arizona was actually up compared to last year — $92,887 to $89,601. That this number is increasing, especially in a year when the big-ticket cars were notably less big than we’ve seen in years prior, only reinforces the idea that it’s now the low- and middle-priced cars driving the market.

RM Sotheby’s sold this 1948 Tucker 48 for $1,792,500. Like the Ferrari above, it has a connection to history — it was Preston Tucker’s personal car.PHOTO BY DARIN SCHNABEL COURTESY OF RM SOTHEBY’S

We’re not suggesting that the typical enthusiast can spend nearly $100,000 on a car; that’s certainly not the case. But note that the above numbers are average, not median, prices; they’re dragged up by the high six-figure and seven-figure offerings. Cars and trucks in, say, the $40,000-$75,000 range continue to see strong interest. That’s out of the impulse-buy zone for the vast majority of us, but it’s within “lifetime attainment” territory for a sizable chunk of the collector car hobby — especially when financing at prerecession terms is, for better or for worse, readily available once again. (There are plenty of deals under $10,000 to be had at all the big auctions, too, but that’s another story for another day.)

We also see this in the Mecum results; the big overall number only tells part of the story. With 2,208 vehicles of 3,023 moved, the house achieved a 73 percent sell-through rate. Given the number of lots sold with a reserve, that’s very respectable for the company. Clearly, people are still buying — but they’re not buying those cars at the tip-top of the market. Many of Mecum’s showstopper lots, including the Dick Landy ’65 Dodge Hemi Coronet A/FX from the Nick Smith factory lightweights collection, failed to find takers. A car like that could easily be the centerpiece of a collection; whether tax law changes caused certain buyers to balk, or whether dragsters piloted by mid-1960s racing personalities are failing to resonate with younger collectors, remains to be seen.

If there’s any lesson in this, it’s that those of you who thought the dizziness-inducing, record-setting prices for high-end cars couldn’t last forever, you’re partially right. The bubble, if indeed it is one, hasn’t popped, but the car in question has to be very special indeed to convince a buyer to pony up big money these days.

But those of you holding your breath for a broader market collapse, no dice. There’s still an army of enthusiasts out there with an appetite for moderately priced vintage sheetmetal, and they’re driving sales of everything from 1950s cruisers to 1980s sports cars — just about anything on four wheels, trucks and late-model exotics included. Rather than trying to time the market or letting yourself get intimidated by big numbers in headlines, find what you like, chase down the best example you can afford and have fun with it.

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