Vintage Car Collectors Drive a Hard Bargain at Automobile Auction : Slump: The once-hot market for rare autos has cooled, largely because of the weak economy. Prices for some exotic models are down 30% or more.
At a car auction last month in Woodland Hills, one of the more unusual cars sold was a 1955 Kaiser Darrin. As the aquamarine roadster was slowly driven to the auction’s center stage, nearby buyers, sellers and bystanders buzzed with excitement.
The car’s owner was a Laguna Niguel business executive who said he had to sell the car--and hoped to sell the eight others in his collection that weekend--because the sluggish economy forced him to close his transportation business and left him saddled with bills.
“It breaks my heart to sell that car,” said the executive, who asked not to be identified. Worse, he said, is that “I won’t get the price I want because of the market. It’s a buyer’s market.”
Standing impassively nearby was one of those buyers, Herbert Livingston, a renowned collector from Charleston, S. C., who owns more than 300 vintage cars. His representative, Jim Studley, submitted the winning bid for the Kaiser--$21,000.
“It was just an absolute steal!” Studley said afterward. “I have seen cars like that sell for $55,000.”
Not any more. The once-hot market for rare cars has cooled in recent months, just as it has for art and other collectibles, in large part because of the weak economy. Prices for many collector cars, which were rising 10% to 40% a year in the late 1980s, are now flat compared to a year ago. Prices for some so-called exotic cars, such as certain Ferraris, are down 30% or more.
The market has suffered a classic speculative bust, not unlike those that periodically hit Wall Street or the housing market. Speculators had bought rare cars on the assumption that they would keep soaring in value, and prices did rise as long as other speculators kept buying. But then the buyers vanished, purging much of the speculation and bringing prices down.
“You had guys who jumped into this business and bought one or two cars and were counting on everything to fly,” Studley said. “But it didn’t fly. Now they need their money out of it.”
Meanwhile, some people who bought rare cars not so much to get rich, but because they like cars, also are forced to sell. That’s because, as in the Laguna Niguel executive’s case, their pockets are pinched by the slowing economy. That also drives prices lower.
“We’re seeing a lot of anxious sellers,” said Drew Donen, a co-owner of Moorpark-based Spectrum Auction Co., one of the nation’s largest car-auction firms and manager of the Woodland Hills show. “It’s a tough market.”
Donen said 70% of the 400 cars that were put up for sale at the auction in Woodland Hills actually sold, better than the 60% to 65% sales rate for his typical auction. But of the 400 cars, nearly 25% had no reserve, meaning that there was no minimum bid required and that the sellers agreed to take whatever they could get. Just two months earlier at another Spectrum auction, only 12% of the cars had no reserve, Donen said.
The market for exotic cars, such as Ferraris and Lamborghinis, is being particularly hard hit. The exotics drew the most speculative fever--and the sharpest increase in prices--in recent years, but “these cars have fallen as fast as they went up,” Donen said.
Rick Cole, head of Rick Cole Auctions in North Hollywood, another of the top U. S. car auctioneers, said his business is off 25% to 30% from last year, when his car sales totaled $30 million. He takes part of the blame, saying he kept trying to auction too many exotic cars even after their sales began drying up early this year.
A 1972 Ferrari Dino Spyder sold for as much as $150,000 eight months ago, but today “would be very lucky to get $100,000, and $80,000 is a lot closer,” said Nancy Eszenszky, who reports on Southern California auctions for Old Cars Auction Results, a trade journal of Krause Publications. (Donen, incidentally, owns a ’72 Dino, a model that was Ferrari’s lowest-priced entry when it was unveiled in 1967 and only in recent years became very popular among collectors.)
A 1973 Jaguar XKE Roadster with a V-12 engine that fetched $100,000 a year ago would now sell for $55,000 provided it was “in very perfect condition,” Eszenszky said.
Car buffs said some segments of the market remain stable, even if prices aren’t rising sharply. Although exotic-car prices plunged, prices for “medium-range cars, say $20,000 to $70,000, did better, dipping 15% to 20% or holding even,” Car Collecting & Investing, an industry newsletter, recently reported.
Brian Jackson, whose Barrett-Jackson Auctions of Scottsdale, Ariz., runs perhaps the most closely watched auction early each year, said 1950s cars in particular have held up, as have well-restored classics from the ‘20s and ‘30s.
Donen said Spectrum Auctions, which expects to handle more than $30 million in car sales this year, also has not suffered a significant drop in business. Although Cole is known for selling ultra-expensive cars, both he and Donen make a good chunk of their money from peddling more mundane brands--priced from $5,000 to $70,000--such as Ford Mustangs, Mercedes-Benzes, Chevrolet Corvettes and Lincoln Continentals.
Those models “are still selling because people who love cars, and not just for the money, are still bidding for those,” he said.
Spectrum was started by Donen, a former stockbroker, and Kurt Hazard in 1984, and although Donen declined to divulge Spectrum’s annual revenue, it likely totals less than $5 million based on Spectrum’s fee structure.
As with all auctions, collectors pay a commission on the way in and out of the market, making the decline in prices all the more painful for the sellers.
Spectrum charges sellers who use its auction between 2% and 7% of the cars’ selling prices, and the buyers are charged 4.75%, for a total to Spectrum of up to 11.75%. It also charges a registration fee of $50 to $400 to the sellers as sort of a handling fee in case the car isn’t sold, and the public was charged $5 per person at the Woodland Hills auction. Cole, who has been in the business 17 years, charges 11% per car sold--6% to the seller and 5% to the buyer.
At the Woodland Hills show, Paul Poorbaugh of Santa Barbara sold his 1961 Rolls-Royce White Cloud II for $10,000--though not by choice. “I just bought the car five months ago and I paid $15,500 for it under the assumption I made a helluva buy,” he said. But Poorbaugh said he had to sell because “I needed the money, so I took it in the shorts for $4,500.” (He had bought the car relatively cheaply because it wasn’t in mint condition; among other things, it has a General Motors engine and transmission.)
In this market, one collector’s desperation to sell is another’s opportunity. People such as Livingston, who still have ample cash to enlarge their collections, “know that now is the time to buy,” Eszenszky said. “They’re out there looking for the deals.”
Livingston, 68, who got rich as a major supplier of fireworks, bought 11 cars at Spectrum’s Woodland Hills auction, spending roughly $400,000, and he claimed that not every one was a bargain. “Unusual cars bring money no matter what,” he said.
In one stroke of either experience or luck, he predicted to a reporter that a rare 1926 Rickenbacker roadster would fetch about $35,000 at the Spectrum show, then a few minutes later watched as his colleague Studley bought the car for him with a winning bid of exactly $35,000. (The Rickenbacker was built by World War I flying ace Eddie Rickenbacker, who later headed Eastern Airlines.)
Auctioneers said that with prices of rare cars having fallen back, the market seems to have bottomed out. “I have more bidders at this date than I did last year,” said Jackson of Barrett-Jackson. One reason: Foreign investors are increasingly bidding for cars due to the U. S. dollar’s weakness relative to other currencies.
“Sentiment in the marketplace, the only leading indicator or index we subscribe to, is noticeably improved in the last two months,” the Car Collecting & Investing newsletter said. “Not everywhere, nor for every car, but overall.”
