all photos:richard s.carey Collector CARS...of each year’s collector car market. In 2001, its 30th year, B-J sold 83.8 percent of the cars that rolled across its auction block, ringing

63Fourth Quarter 2001

TThe collector car market has gone from boom to bust to recovery in the past

decade. Meanwhile, dreams of easy riches have withered, revealing a basic truth:

the market for collector cars is dominated by enthusiasts who value cars as his-

torical artifacts and sources of recreation. Thus, while those who speculate in old

cars occasionally make money, playing the collector car market for profit will

probably prove to be a costly fling.

Old automobiles aren’t simple investments. Unlike fine art, which does just

fine hung on a wall or plunked on a plinth and treated to an occasional dusting

By Richard S. Carey

CARSCollector

Investmentor Indulgence?

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64 The Milken Institute Review

and insurance premium payment, cars re-quire storage, maintenance and regular exer-cise. Motivations for playing the old-car gamerange from possessing that which wasunreachable in youth, to enjoying the pastimeof restoration and tinkering, to being a part ofhistory by owning a vehicle once driven byJuan Fangio – or even Elvis.

The wide scope here explains many seem-ingly irrational acts of buyers and sellers. Forexample, it’s not uncommon to see a pristinecar, just months out of the restorer’s shop,offered for sale. Usually it has served its pur-pose (getting an invitation to Pebble Beach,Hurlingham or Bagatelle Concours d’Ele-gance) and is ready to be passed down thechain from a concours-oriented collector toone who will drive it proudly in tours andevents. At Christie’s recent auction in Tarry-town NY, the owner of a spotless 1957Thunderbird that had won everything itcould win, sold his pride and joy because, “Iscraped, sanded, primed, painted and pol-ished every square inch of its undercarriage,and I can’t bear to drive it and think about itgetting messed up.” Presumably, the new ow-ner will have no such qualms.

By the same token, fixer-uppers oftenbring surprising prices. Bonhams & Brookssold a neglected Squire roadster at its August2001 auction on California’s Monterey penin-sula for $134,500. Though a beautiful andvery rare piece – one of only six survivors – ithas little history, and in restored condition itwill be worth little if any more than its pur-chase and restoration cost. Yet for the newowner, the process and the pride in saving,

and eventually displaying, a nearly unique caris a large part of the ownership equation.

At other times cars sell for far more thancomparable transactions suggest they areworth. In one memorable moment last yearfrom the annual Barrett-Jackson auction, abidder took home a beautifully restored ’56Chevrolet Bel Air convertible for $86,000 –$15,000 to $20,000 more than expected. Butthose who witnessed the event understandwhat happened. The successful bidder’s wifeturned to him with a smile as big as Joe E.Brown’s, followed by the most sensual kissever seen at Barrett-Jackson.

the auctions – a capsule historyThe idea of auctioning collector cars is rela-tively new. It began in England, whereSotheby’s held its first dedicated car sale inthe mid-1960s. Christie’s followed suit inshort order. Parke Bernet began auctioningcars in the U.S. before its acquisition bySotheby’s.

Early auctions were held in cooperationwith pioneer collectors like James Leake in theU.S. and Lord Montagu of Beaulieu in theU.K. In the 1960s and 1970s, collecting was agentlemen’s affair with cars trading among asmall club-like group. Indeed, until the late-1960s collector car auctions routinely namedthe cars’ purchasers in their published salesresults – stark contrast to today’s secretiveworld where anonymous bidders hide behindtelephones. David Patridge, former head ofSotheby’s car department, marks theFebruary 1979 auction of the collection ofMayer L. “Bud” Cohn in Los Angeles as themoment when the collector car market shift-ed to a period of serious accumulation.

The market really only became visible tothe mainstream media with the sale of thealmost mythical collections of Bill Harrah in1986. Harrah’s holdings were vast and eclec-

c o l l e c t o r c a r s

R I C K C A R E Y , who used to earn an honest living as thecommercial director of Callaway Cars in Connecticut, is nowa frequent contributor to AutoWeek, Classic & Sports Carand Ferrari Market Letter, on the subject of car collecting.


tic, from Model Ts to Bugatti Royales. Indeed,so many cars were stuffed into his warehous-es in Reno, Nev. there was concern that theirdisposition would glut the market. YetHarrah’s cars brought high prices that seembarely reasonable even today, creating thecore of several storied collections. The last ofthe four scheduled Harrah’s sales, includingthe best cars in the collection, was never held.General William Lyon bought all of them in asingle transaction for some $29 million.

The Harrah’s sale launched a boom thatwould generate eight-figure prices at thepeak. The frenzy was particularly acute forFerraris. Enzo Ferrari’s death in 1988prompted speculators to bet that someonewould pay large premiums for Ferraris man-ufactured before the company was taken overby Fiat. When it became apparent thereweren’t enough Ferraris around to satiatespeculators’ appetites, the mania spread toanything Italian.

But the bubble burst when speculatorswoke up to the reality that they’d been tradingthe most pricey cars among themselves.Sotheby’s auction of the Rick Carroll collec-

tion in May 1990 effectively marked the end.Christie’s managed to eke out a few sales atprecollapse prices at Pebble Beach in August1990, including a unique McLaren M6B GTfor $1.32 million. (The McLaren’s buyers werestill trying to dig their way out from under itin 1998 when it was offered at RM’s MontereySports Car Auction, but attracted a high bidof only $370,000.) Japanese buyers, who hadaccumulated collections of cars (as well asImpressionist paintings and first-growthBordeaux wines) on the strength of soaringTokyo real estate values and easy bank loans,simply vanished. The capital gains that hadfueled American buyers dried up.

The market that followed in the early1990s was so thin that it wasn’t uncommon to see good cars offered with no takers. En-thusiasts, who just wanted fun wheels to toolaround on weekends, to take to shows, or torace in vintage events, had been priced out ofthe market. Those who did have seriousmoney to invest had no idea what the carswere worth, and sat on their wallets waitingfor enlightenment.

The 1991-93 period was one of retrench-

ment as prices plunged and the plungerseventually swallowed seven-figure losses.Then, gradually, the market recovered. Todayit’s surprisingly healthy and active, given therecent softness of the economy.

auctions transactionsAuctions are the only resource for publiclyannounced transactions in the collector carmarket. Experience has shown their results tobe consistent, and in retrospect many transac-tions that were questioned when first report-ed have stood up well in the glare of hind-sight.

The Barrett-Jackson auction is held eachJanuary in Scottsdale, Ariz. It began in 1972and has the longest continuous history underconsistent management in the same location.B-J has become known for the catholicity ofits offerings and its stature as the bellwetherof each year’s collector car market. In 2001, its30th year, B-J sold 83.8 percent of the carsthat rolled across its auction block, ringing upa total of $26.7 million in sales.

B-J’s first auction was organized by classiccar dealer Tom Barrett and collector RussJackson. Held at Scottsdale High School, 40cars – mostly from Tom’s and Russ’ own col-lections – were offered. No one remembershow many were sold, but the auction broughtin about $650,000 (about $2.8 million intoday’s money). By the mid-1970s, B-J wasdoing over $1 million in sales. Its transactionsfaltered in the early 1980s, then began to pickup steadily. The graph (page 67) shows resultsfor the past 22 years in both absolute amountsand inflated to January 2001 prices.

In recent years B-J has benefited both fromthe market’s recovery and from CraigJackson’s vision of creating an event aroundthe auction. The auction offers vast numbersof high quality, accessible cars, largely without

minimum-reserve bids. Buyers can feel confi-dent that the cars are really for sale, notbrought for show or to create some phonylegend by being bid up by shills. The formulahas paid off. In 1982 there were 0.92 regis-tered bidders for every car offered. By 1988that had grown to 1.13. This year there were3.77 registered bidders per car offered – 3times as many as in 1988.

Christie’s U.S. sales moved around untilmanagement noted the success Rick Cole washaving with an annual auction on the Mon-terey peninsula during the Pebble BeachConcours d’Elegance/Monterey HistoricRaces weekend. After that, Christie’s estab-lished its own sale at Pebble Beach in 1990.The market was diving into the previouslydescribed crater, but Christie’s persistenceand deep pockets overcame its bad timing,and “Christie’s Pebble Beach” has become agreat success. In 2000, it sold 98 of 112 carsoffered (including the bulk of two major col-lections) for a total of $26.5 million in justover four hours.

Sales at Christie’s Pebble Beach are hard toanalyze because of the irregular appearance ofblockbuster cars and major collections:

• In 1990, 10 cars of only 26 offered weresold, yet nine of them brought over $250,000in the last gasps of the late-1980s frenzy.

• In 1995, the “Rimoldi Alfa” 8C 2300Touring-bodied Spider (sold by Christie’s in1989 at Monaco for – ouch – $2.958 million)brought $1.8 million. Raymond Lutgert’sparade of 15 spectacular Rolls-Royces, 11 ofwhich brought six-figure prices, added depth.The CPI-adjusted median sale was $121,200.

• In 2000, a Ferrari 330/P3 (the most vol-uptuous of all Ferrari racing cars) copped$5.616 million. Two collections, of Bob Su-therland and Matt and Barbara Browning,made up much of the balance of the sale inwhich the quality and reputation of their cars



brought outstanding prices. Fifteen cars ofthe 112 offered brought over $500,000 each.

• The 2001 auction, the first after the dot-com collapse, brought a return to reality. Cars

consigned were down by 25%. The sale’s per-formance plunged to a 64.7 percent sale rate,in some measure burdened by a collection ofIndy cars that attracted little interest. More


YEAR/CARS OFFERED

CPI ADJUSTED TOTAL SALES($ millions; CPI adj. to 2001)

TOTAL SALES

MEAN SALE

$0

$10

$20

$30

$40

$50

$60

$0

$20

$40

$60

$80

$100

$120

’80 ’81 ’82 ’83 ’84 ’85 ’86 ’87 ’88 ’89 ’90 ’91 ’92 ’93 ’94 ’95 ’96 ’97 ’98 ’99 ’00 ’01650 530 650 650 560 590 700 850 1,060 950 894 1,100 802 737 600 700 700 571 702 734 722 850

CPI ADJUSTED MEAN SALE($ thousands; CPI adj. to 2001)

BARRETT-JACKSON AUCTION, SCOTTSDALE, ARIZONACPI ADJUSTMENT BASE JANUARY 2001

cars were sold under Christie’s low estimatethan over the high. The median sale, however,was a healthy $110,500.

Enthusiasts this past summer were lesswilling to step up to top-dollar bids. Col-lectors in Japan and Europe still send cars tothe U.S. (a flow amply demonstrated inMonterey) where they sop up as much of col-lectors’ liquidity as they can, accepting mod-

est U.S. market prices in relatively strong U.S.dollars.

At the same time, there remains ample liq-uidity among collectors for the very best cars.Machinery of impeccable provenance, greatbeauty, superb condition and technical re-finement still draws buyers like bees to nectar.Examples from Monterey are plentiful,whether they are fantastic Ferraris (RM’s 410Sport, the weekend’s top sale at $3.9 million),beautiful Bugattis (Bonhams & Brooks’ Type57S Atalante), marvelous Mercedes-Benzes(Christie’s 540K Cabriolet) or famous Fordrace cars (Russo & Steele’s ex-Bud MooreTrans Am Mustang).

Sales totals are still impressive. But thecomposition of the sales’ consignments haschanged to high quality but lower pricedmodels accessible to larger numbers of collec-

tors. This more diverse mar-ket is inherently more stablethan one heavily dependentupon a few deep-pocketedcollectors and high-rollingspeculators.

selected marquesand modelsIn the world of collectorcars some features are muchmore desirable than others,which sometimes yieldorder-of-magnitude differ-ences in market value be-

tween otherwise similar models. Conditionand originality also contribute to value.Individual transactions are fraught with sub-jective considerations of time, place, presen-tation and configuration. To minimize thesevariations, I’ve selected a few popular collec-tor cars that appear frequently with commoncharacteristics and enough sales to be repre-sentative. Each of these cars is essentially like



YEAR

PRICE($ thousands, CPI adj. to 08/01)

$50

$25

$0

$125

$100

$75

CONDITION-2 TREND

CONDITION-3 TREND

’91 ’92 ’93 ’94 ’95 ’96 ’97 ’98 ’99 ’00 ’01

(53 transactions: 43 U.S., 10 Europe)

CONDITION-1 TREND

JAGUAR XK 120 ROADSTER PRICESCPI ADJUSTED TO AUGUST 2001

the others except for condition.Condition, of course, is important. Dave

Brownell originated a condition gradingscheme when he was editor of Old CarsWeekly. It’s simple and has become widelyaccepted, rating cars’ conditions on a 1-5 scaleas follows:1. Perfect to an extent that’s better than the car

was when delivered.2. As it would have been displayed on a deal-

er’s showroom when new.3. Presentable and fully functional.4.Flawed in some serious degree.5. Rough, not running or seriously damaged,

or deteriorated.The auctions see a lot of 3s, a fair number

of 2s and a few 1s. The 4s and 5s are rare atauction, simply because buyers faced with agood selection of well pre-sented, usable cars turntheir backs on all but themost intriguing projectcars. Observers’ conditionevaluations are highly con-sistent over time.

Jaguar XK 120s are sta-ples of the collector carhobby. Restorers have am-ple experience and partssupplies, so maintenance,repairs and restorations canbe consistent. That shows inthe reported transactions.XK 120 Roadsters mirroralmost exactly the qualita-tive impression of the market’s performance:a depression in the early 1990s followed byrecovery since ’95 or ’96. These data show asteady increase following the post-frenzy con-fusion with the greatest strength in the highquality show and near-show condition cars.

Mercedes-Benz Gullwings bring fourtimes the prices of XK 120s. They’re one of

few mid-six-figure cars to be produced insome quantity that show up at auction fre-quently with consistent specifications.

The Gullwing data reveals today’s strongpreference for cars in very good condition.The declining trend line for condition-3 carsshouldn’t suggest their prices are goingthrough the floor, but rather that the


YEAR


$200

$150

$100

$50

$0

$350

$300

$250CONDITION-2 TREND

CONDITION-3 TREND

’91 ’92 ’93 ’94 ’95 ’96 ’97 ’98 ’99 ’00 ’01


CONDITION-1 TREND

MERCEDES BENZ 300SL GULLWING PRICESCPI ADJUSTED TO AUGUST 2001

preference of low-six-figure buyers is forsound cars that can be driven with bothconfidence and pride. It often takes a big wadof cash to make iffy Gullwings reliable andpresentable. Spending a known amount forcars that have already had their shortcomingsremedied reflects an economically rationalpreference for minimizing the risk of expen-sive work on shaky examples.

[Note: The transactions on which the

graph is based are “plain” 275 GTBs: 3-carb,2-cam cars with steel bodies.]

Ferrari 275 GTBs get everyone’s juicesflowing. It is one of Italian car-body designerPininfarina’s most alluring shapes and it’s thelast of Ferrari’s front-engine V12-poweredproduction cars that could be driven off theshowroom floor directly to the race trackwith good prospects of success. The alarmingplunge in values of condition-2 275 GTBstells the story of production Ferraris’ valuesfollowing the late-1980s frenzy. 365 GTB/4Daytonas’ values look even worse. Values of275 GTBs have stabilized in the $200,000range over the past couple of years, supportedby their seductive shape.

The 1955 Thunderbird had few optionsand most appear in very consistent trim. ’57

‘Birds may be more sexy, buttheir expanded options listmakes comparison imprac-tical. The performance ofcondition-2s and 3s is clear.Their CPI-adjusted valuescratered in the early 1990sand have only just climbedback to break-even. UnlikeFerrari 275 GTBs, however,the ’55 T-birds’ decline bare-ly ventured into five figuresin real dollars, and a 1990buyer has had a decade’s en-joyment of a charismatic

and affordably maintained machine.The transaction histories presented here

are supported by much other data, all show-ing comparable trends. The frothy market ofthe late 1980s carried over to a few transac-tions at high prices in the early 1990s, settleddown to build a new base from 1993-95, thenbegan a slow increase that has brought infla-tion-adjusted prices nearly to their early1990s levels in the past two years. Today’s dol-



YEAR


$200

$150

$100

$50

$0

$350

$300

$250CONDITION-2 TREND

CONDITION-3 TREND

’91 ’92 ’93 ’94 ’95 ’96 ’97 ’98 ’99 ’00 ’01


FERRARI 275 GTB PRICESCPI ADJUSTED TO AUGUST 2001

lars buy just about as much collector car asthey bought a decade ago – nice to know ifyou enjoy cars, but bad news for folks whothink of them as investments.

The cars, overall, have improved in qualityand presentation. There is no shortage ofgood cars. And buyers who once stood ontheir financial toes to grab a shaky Ferrari 275GTB now appear willing to purchase a verygood 365 GTB/4 Daytona instead. The specu-lators of the late 1980s, who flipped cars likepancakes at IHOP, are gone, replaced by carenthusiasts who are using their purchases forvintage racing, rallying and touring.

conclusionThere are plenty of accurate anecdotes aboutcollectors who’ve hit home runs in cars. Usedbut uncompetitive CobraDaytona Coupes havechanged hands for a fewthousand dollars and areworth $4 million today.These are, however, therare exceptions. Once in awhile a collector’s choicewill turn out to be a pre-scient investment, but thatis the exception. The ruleis that car collectors areenthusiasts who buy carsthat give them pleasurefrom ownership and use,not for financial gain or inflation hedge.Eventually they will sell their cars into a mar-ket of other like-minded enthusiasts who willvalue their acquisitions in essentially the sameway they were valued when acquired: in termsof recreational value.

Collecting cars doesn’t stack up well as aninvestment, even buying when the market isweak. As is clear from the graphs, the returnon investment in the 1990s was positive, but

nothing to crow about. Early signs from thecurrent slowdown indicate values are climb-ing even more slowly, if at all, than in therecent past. As an avocation, however, theremay be few other ways to have so much fun,meet so many good people, visit such neatplaces as honored guests and participate inthe preservation of an important part ofmodern history at such reasonable cost andacceptable risk.


M

YEAR


$20

$15

$10

$5

$0

$35

$30

$25

CONDITION-2 TREND

CONDITION-3 TREND

’91 ’92 ’93 ’94 ’95 ’96 ’97 ’98 ’99 ’00 ’01


1955 THUNDERBIRD PRICESCPI ADJUSTED TO AUGUST 2001

Documents

all photos:richard s.carey Collector CARS...of each year’s collector car market. In 2001, its 30th year, B-J sold 83.8 percent of the cars that rolled across its auction block, ringing