Changes in the classic car landscape
I cannot help but notice that things have changed very quickly over the last few years. Historically, classic car values rose almost every 6 months, while dealers were willing to purchase inventory and hold it for a year or more until sold.
In recent years, two things have changed the landscape. Many dealers today avoid inventory altogether and work either strictly on a consignment basis or purely on a commission for brokering arrangements between buyer and seller.
Additionally, auction houses have increasingly become retailers, taking over most of the classic-car market in the process. Everybody knows this. Ultra-rare and highly desirable cars going for record prices have stolen the show and the limelight from the dealers.
And there is a reason for that. The big auction houses have very cleverly poured money into marketing and brand awareness efforts, leaving many established classic-car dealers behind, fighting for a diminishing market share of the hugely competitive midstream, or the low-margin (ie, unprofitable), bottom end. Only a handful of classic-car dealers have followed the trend and become global brands, or have at least put plans into motion to that end. Unfortunately, most have chosen to continue doing business the traditional way and to stay local, much to their own detriment.
I have been a senior marketing advisor for 30-odd years and regularly advise many involved in the market. There have been a lot of opportunities lost.
Above: Collector, advisor, writer and marketing expert Michael Kliebenstein scouts for many car collectors, museums and other historic car-related companies worldwide.
Additionally, young millennials have recently emerged as new customers for classic supercars. As expected, they’re completely at ease with the idea of participating in online auctions, which have turned out to be a great success.
Collectors’ tastes have begun to shift towards younger cars too. Even among the older collectors and investors, the trend has been to buy younger cars. Think about the Ferrari F40, which rose from around $600k to north of $3 million in less than four years. Now it’s very hard to find a good one at all.
Demand for pre-war brands such as Invicta, Alvis, Sunbeam, MG, Delage, Delahaye, Vauxhall, Amilcar and Lagonda has stagnated in the absence of marketing activities from the industry. Some have almost become dead brands – very hard to move on.
Even the best pre-war cars from Bentley, Bugatti and Mercedes suddenly find themselves competing with youngsters such as the Lamborghini Miura, McLaren F1, Pagani Zonda or the smart Ferrari supercars of the 1980s and ’90s. With an eye for new business, auction houses list them close together in their catalogues. Very smart marketing.
For classic-car dealers of the future there is only one way to go. They need to develop a better understanding of their core customers. These are powerful men and woman who shop around for pleasure and relaxation and appreciate service and creativity. They are confident, knowledgeable people who have their own styles and tastes. Personal relationships are at the core of business with them. They want to consider you as a ‘friend‘ rather than a dealer who sells them a car. You have to allow yourself to share their work and their stories in a truly authentic manner.
I have been an advisor for many collections and collectors over the years. Most of the time I consider it a privilege to know these people, to see them in their houses and to meet their families. That may be an uncomfortable playing field for most car dealers, but it is essential. It really is all about going the extra mile.
Many good classic-car dealers today find themselves stuck with a showroom full of the most beautiful exotica you can own: a Bentley S1 Continental, a 4 1/2 litre WO Bentley, several Jaguar XKs, Rolls-Royce Phantoms, a Bugatti Type 57, Alfa 1750 GS, Mercedes-Benz 500K, Delahaye 135M Figoni & Falaschi, to name but a few. The reality is, it takes a lot of effort and energy to move any one of these today.
It does help that in many cases we’re not just selling cars but tickets into another world, into all the major classic-car events. Pebble Beach, Mille Miglia or Villa d’Este are still strong selling points. Long may they continue.
I must also mention that for whatever reason, the service and export demands from overseas customers have risen in the post-Brexit era. Classic-car companies with tight margins and non-transport policies have been losing out and have become less desirable for demanding clients.
Anyone who has tried to bring an untaxed car on a trailer into Belgium, Switzerland or Germany knows the implications can be huge if caught on the wrong foot. In fact, the receiving client might be fined for not being able to produce a carnet or T1 document at customs in their homeland when they want to register the car. Not many dealers seem to know that and it makes clients very angry.
All these new developments have created a perfect storm for classic-car dealers, of which I guess a good 60 per cent are situated in and around the Greater London area.
The parts business has also been badly hit, even for EU-based distributors who desperately need UK parts. For some, the situation has become untenable. There must be hundreds of classic cars in the EU and overseas blocking workshop lifts and workshop space, waiting for parts, sometimes for months. People are getting quite angry, I can tell you. And it all comes back to the dealers.
Brexit has created mayhem and an uneven playing field. It’s currently very hard to get things either in or out of the UK. Parts end up in customs, again sometimes for months.
While classic car companies in the EU have other bureaucratic hurdles to solve (such as having to provide a two-year guarantee for for old cars, which I find is complete nonsense), the UK is being squeezed out of the market by crazy French customs regulations and procedures.
Some dealers, on both sides, continue to push through with less than scrupulous methods, such as driving cars deliberately through customs without declaring anything, or delivering via Ireland. It’s the same for parts and automobilia. However, this cannot be the future.
I am not speaking about India or South America here, which is another even harder playing field because of exorbitant transport costs and logistical difficulties. I have seen some invoices for transport, and they are in some cases as much as 20 times what they were just two years ago.
A heavy price-correction for the midstream market is also under way. As yet, it seems collectors and buyers are not aware of it, but the dealers are certainly feeling the pinch.
At the time of writing, many good dealers in the UK and the EU are desperately functioning as ‘market makers’ by keeping their advertised prices high. I am of the opinion that is the only way to go as it helps the whole industry.
Yes, auction houses appear to move cars quicker than anybody else. But sellers beware; transport, insurance and commissions could eat significantly into any profit you might make. I think a good dealer, given sufficient time, can achieve more. And it will always take time.
Still, I know from my own experience that many good deals are done off-market. Some, way below asking price, and most including transport, tax and ready-to-go delivery services. Unwelcome part-exchanges might also come into the equation. Many average or miserable cars have to be taken in. But it is what it is, and many dealers will comply in order to get a deal done.
I feel that everybody is hyper-aware of the auction market, both on- and off-line. As I mentioned earlier, right now, the younger generation is the driving force behind the markets. They often buy sight unseen on their iPhones.
Customers are highly aware of changing car trends too. This is not a good thing for you if you have the wrong inventory. Have you tried to sell a Triumph TR 4 or an Austin-Healey 3000 recently? Or even a Bentley S2 Continental Flying Spur?
All of that puts a lot of pressure on the classic-car market.
Smart dealers move quickly with the trends, be that a Ferrari F50, Porsche GT2 or Ferrari 275 GTB torque-tube, or other significant Aston Martin or Lamborghini sports and race cars, but most midstream companies will have to lower their expectations in the coming year.
The war in Ukraine hasn’t helped matters and many dealers simply cannot sustain the high levels of margins they became accustomed to in the years preceding Covid-19.
I see many good cars going for 30 per cent less than they might have done two or three years ago just because they need to be moved out of the showroom quickly.
Is it time to buy? Absolutely!
For example, there is no rational reason why a 1962 Jaguar E-Type 3.8 Roadster should only be valued at one-tenth the price of a contemporary Ferrari 250 GT cabriolet. Absolute madness.
Sometimes the market can be wrong too.