Ferrari Mailing List: Re: Vehicle Price Index

[Erik Nielsen (judge4re]

I've been a casual observer of the market for the last 15 years. One
thing about these market studies that they fail to take into account
is that most cars are illiquid unless you feel that there is no other
way to buy unless you pay top dollar. If there are 2-3 cars on the
market at any one time, you can be picky and prices will be lower. A
quick glance of Nada or any other price guidelines will tell you that
published numbers are crap at best and likely misleading.

On 11/8/10, Larry B <larrybard [at] hotmail.com> wrote:
>
> Diversify Risk With A Dream Machine - The Evolving Classic Car Market
>
> Tom Burroughes Group Editor in London
>
> Whenever a classic car is sold at auction, there is often plenty of interest
> if the vehicle was once owned by a film star or, even better, actually
> driven by one in a movie. A good case in point is the auction this week of
> the Aston Martin DB5 once used by Sean Connery in Goldfinger and Thunderball
> (complete with those nifty machine guns and the ejector seat). It fetched
> £2.6 million (around $4.11 million). And a few years ago, the auction market
> witnessed the sale in Pebble Beach, California, of Steve McQueen’s Ferrari
> 250 GT Lusso, which sold for $2.3 million, about double what was expected.
> And some cars, meanwhile, fetch enormous prices due to their mystique and
> style: a Bugatti was sold for a record-breaking $30 million earlier this
> year.
>
> Of course, these are the headline-grabbers. Many other classic cars do not
> fetch such a high price and the sector has not been totally immune to the
> recent financial turbulence. Three years ago, Christie's, the auction house,
> ceased to be involved in selling classic cars as a distinct line of business
> as part of a restructuring of its operations (a view that mystifies some
> specialists).
>
> The world of investment in collectables, however, remains vibrant; objects
> such as classic cars are, like fine wines or art, seen as a potential hedge
> against economic woes.
> As every car differs individually – even mass produced classic vehicles have
> their quirks – there is not a simple index of all their prices for investors
> to track. But in the UK, and elsewhere, more efforts are being made to
> generate credible and consistent benchmarks on the performance of parts of
> the market.
>
> Step forward Dave Selby, a UK-based analyst who has been working in the
> international auction market for a quarter of a century. Working with
> Historic Automobile Group International, a research house set up in 2007 by
> former banker Dietrich Hatlapa and Hardeep Sohanpal, a publishing expert, he
> runs a database of more than 100,000 transactions, according to the group’s
> website. Selby recently told WealthBriefing about his work.
> How would he describe the classic car market?
>
> “It is an interesting collectors' niche market that is fragmented and under
> researched. That's why we feel there is a real need for proper research and
> transparency. For example, the high-end collectable Ferrari market is
> certainly far more volatile than other segments and marques and with a far
> greater amplitude than, say, Porsche,” he said.
> “One reason is that Ferraris have always attracted an element of
> speculation. If you're thinking of entering the market it's important to
> understand these nuances, particularly as auction house PRs have been
> promoting what seemingly is a never-ending chain of record prices. The
> reality is more complex and, in fact, some prices have not yet recovered to
> their 1989 peak - that's a story you don't hear often,” he said.
>
> A key issue is defining what a classic car actually is, he said. “The
> parameters to define this market are up to the individual collector. We at
> HAGI for example have 15 parameters for index inclusion, and an index
> committee makes the final decisions just like most stock market indices. For
> example, the car should have turned the 'price corner,' that's a key moment
> of separation, if you like,  that distinguishes the truly collectable,” he
> said.
>
> Investors interested in this segment, both due to hard-headed financial
> reasons, and for love of cars, will want to know whether these cars’ prices
> are lowly, or even negatively, correlated with those of mainstream assets
> such as equities. According to HAGI’s website, The HAGI Top Index, which
> tracks the prices of rare, exceptional cars dating from the earliest years
> of automobiles to the current era, has risen from its base of 100 in 1980 to
> around 2,700. The US S&P 500 Index of US stocks rose from the same
> comparable level before falling sharply. A graph of the two indices can be
> viewed here.
>
> HAGI produces a variety of indices, such as to track the prices of Porsches
> and Ferraris as distinct categories of desirable car.
>
> In time, if the indices were to become used very widely, it is possible they
> could provide a reference benchmark for a fund, although Selby said no
> investment managers who have contacted HAGI about creating a fund have so
> far got their ideas off the drawing board.
>
> There have been other moves to track prices besides those of HAGI. The
> Hagerty’s Cars That Matter “Blue Chip” Index is such a benchmark, put
> together by the automobile appraiser David Kinney, based in Virginia.
> According to a report by Bloomberg, that index, which contains the estimated
> values of 25 of the most popular collectible cars, increased more than 61
> per cent from September 2006, when it started, to the end of July this year.
>
> Like the diamond investment market, fine wine or paintings, classic car
> investments require a good deal of sustained study by investors, as no two
> vehicles – like precious gems – are exactly alike. The price performance
> highlighted by HAGI elsewhere is clearly impressive. With the super-rich of
> emerging market countries jostling to show off their wealth even as more
> developed countries feel the pinch, the battle to buy famous owners’ cars
> and class marques looks set to remain intense for quite some time to come.
>