The Coronavirus is upending our lives like nothing else in modern history. Out of nowhere, this black swan pandemic has turned all of our lives upside down. Coronavirus has become the sudden equalizer because we all are feeling the impact in one way or another. From billionaires to small business owners to retirees, we are all facing the same fears and uncertainties. Each of us is re-evaluating our lives, our priorities, and our futures. We are suddenly forced to live simpler lives as we “shelter in place” and try to arrest the spike of this pandemic. Here at Turtle Garage, our thoughts and prayers go out to all those who are sick or otherwise being negatively impacted by this unprecedented global event.
Over the last two weeks we have seen a substantial increase in traffic and a steady flow of inbound questions, comments, and feedback. Initially, we had planned to hibernate and focus on more important things than blogging about cars. However, reader feedback indicates that our audience is looking for meaningful content (and even some entertainment) during these tough times. In the coming weeks, we will do our best to publish interesting and relevant content during these tough times—while being respectful of the gravity of our collective situation. The most popular inquiries from our loyal subscriber base are questions surrounding the future of the collector car market given recent events with the Coronavirus.
In the collector car world, the large traditional auction houses are rapidly adjusting to a new world order as RM Sotheby’s Palm Beach auction moved online inside of one week. Auction giant RM has adopted the wildly successful online-only model of tiny Bring a Trailer.
For today’s post, we thought it would be appropriate to interview three respected collector car experts and solicit their opinions on the current and future state of the collector car market. J.R. Amanita of GT Motor Cars LLC, Dean Laumbach of Laumbach Consulting, and Jonathan Sierkowski of Sierkowski Classic Car Advisors are three very astute and active industry insiders. All three of our contributors are young and energetic and have a wealth of industry experience, acumen, and insight to share.
J.R. Amantea, Founder and Owner, GT Motor Cars LLC, Wallingford Connecticut:
TG: J.R., can you give Turtle Garage readers your perspective on the current market and the industry implications of the Coronavirus?
J.R.: What we see in the near term is brick and mortar auctions consolidating, some even going away for good. Their cash flows are derived from entry fee’s, bidder registrations, catalog fee’s and without any of them they do not have any cash flows. The collector car market has been overcrowded with auctions so this may be a healthy wash out that was much needed. As an independent dealer, I see this as a positive in the near term as 4,000 to 5,000 cars will be off of the market by not having these auctions.
I do feel optimistic as I feel that this pandemic is showing people that life is not guaranteed and it can’t be taken for granted. I feel that people will buy “that car” they have always wanted to check it off the list. On the other side we have talked to new clients that took a lot of money out of the market 20%-40% higher and they are looking to park it in an alternative/hard asset. However they aren’t doing anything until we get some clarity as to when the economy gets going again as they may need to invest the excess capital into their businesses.
I also think with oil under $50 a barrel, especially under $30 a barrel that gasoline powered cars are here to stay for a while, I feel that this bought them another 10 years of life support.
Dean Laumbach, Laumbach Consulting LLC., Tinton Falls, New Jersey
TG: Dean, what are your thoughts on the collector car market given the unfolding Corona Virus?
DL: I believe that collectors and enthusiasts as a whole will start to re-examine the economic sense of buying a collector car as a hard asset. Owning a collector car is unlike buying a piece of art, or most other collectible antiques and artifacts as they typically require expensive maintenance as well as a proper storage environment.
I am myself surprised to see strong numbers still being realized for cars that simply do not appeal to the younger enthusiasts. What are these absolutely beautiful pieces of industrial art worth in 10-15 years? I have not met too many enthusiasts under the age of 40 who are even remotely familiar with these vehicles.
Examples from RM Sotheby’s Amelia Island 2020
1938 Bugatti Type 57 Cabriolet (Chassis 57589) – $1,655,000
1932 Duesenberg Model J Stationary Victoria (Engine J-490) – $1,325,000
1930 Duesenberg Model J Convertible Coupe (Engine J-143) – $1,132,500
1939 Bugatti Type 57C Stelvio (Chassis 57834) – $797,000
The Coronavirus pandemic will undoubtedly leave a scar on many about the uncertainties of life and how things beyond our personal control can have in impact on the value of our hard assets.
The collector car market will survive this, but the due diligence prior to making large acquisitions will soon come into play. I believe the “barn find” phenomenon will be the first victim of the Coronavirus pandemic as buyers will soon realize that investing in these types of cars is at the top of the list of what would be described as a “bad investment” as restoration cost almost always exponentially surpass the value upon completion.
Original low mileage collector cars in pristine condition regardless of make and model will continue to sell strong regardless of uncertainty. Case and point from this past week.
What makes most of these cars so desirable to a collector is they can be lightly driven and enjoyed on fair weather days, and if properly maintained they may see some potential upside in the future. I would never recommend a collector to invest in collector cars as a means to finance the children’s college tuition, however the joy of ownership is something that cannot be not quantified in dollars.
Philip your favorite word “selective” is exactly what we will see being practiced by collectors in the near future.
Jonathan Sierakowski, Sierakowski Classic Car Advisors, Raleigh, North Carolina
TG: Jonathan, you deal in the very high end of pre-war classics. How is the industry going to be impacted by the recent Coronavirus?
JS: Short Term: Beyond the immediate disruption to the automotive calendar, everyone including car collectors will be happy to get out and interact with one another whenever it is safe to do so. In hindsight, Retromobile and Amelia were just days away from being cancelled. We cannot presume when it might be safe to congregate, and it is within the realm of possibility that cancellations continue into late summer. This is a major setback for auction houses if they cannot hold their Pebble Beach sales. RM Sotheby’s notably moved its Palm Beach auction online-only with about a weeks’ notice; if that proves successful then more online-only platforms may be established. The economics of online-only work heavily in the auction house’s favor and – if they can deliver results for their sellers – bricks & mortar could permanently cede a chunk of market share to online-only.
Long Term: Given the context of a market that was already correcting pre-Coronovirus, which is now compounded by global instability that will reverberate into the future, I believe we’re going to to enter another period in the car market as we did following the 2008-09 crisis. Would-be buyers will preserve liquidity until they know which way circumstances affecting them directly are going to cut. Values for million-dollar cars will be hard to establish, with ready buyers difficult to identify. For the next several years, auctions will face challenges procuring heavy feature consignments and more sales of quality product will shift towards the private treaty realm where parties on both sides of a transaction enjoy greater discretion and control.
At the end of the day, collector cars are not a necessity and the future of the hobby (and the industry) is really about fun and enjoyment with friends.
TG: Thank you J.R., Dean, and Jonathan for your valuable insights! Stay safe. Stay positive.