The inaugural London Classic Car Show served up a bit of a curve ball this weekend. Many of the UK’s most high profile classic car dealers exhibited a plethora of rare and beautiful cars just a stones throw from Canary Wharf – the wealthy bit of the world’s richest city – and the sentiment from visitors and dealers was overwhelmingly positive 24 hours into the event.
Two things struck me at the show – the first was that classic car fans really seem to have got used to big numbers. A few years ago the rising premium prices for classics were often met with raised eyebrows and a ‘How much?!’, particularly when it came to discussing the potential price of a restoration. Now they seem inured to them and speaking to a number of customers, friends and bystanders it really does seem that if you say a price fast enough and with conviction then you can make any figure sound reasonable.
“Buying well priced ‘trade’ stock is tough and if they can’t find it then the only alternative is to buy at ‘retail’ money and add the necessary profit margin”
The second was a challenge facing dealers. There were some impressive stands at the show and a number of dealers had invested many tens of thousands of pounds into exhibiting their brands. The classic car industry is big business now and the cost of playing in the premiere league is high, in fact even the cost of playing in Sunday League is looking fairly steep. Every dealer I spoke to also had a shared problem – fierce competition for stock. It was hard to believe given the numbers of ‘rare’ cars on display but dealers really do face a challenge that could affect market values and it’s ironic that dealer demand for cars appears to be stronger than that from consumers.
Most classic car dealers will sell two to three classic cars every month and it’s these low volumes that are the cause for concern. Consider what margin a dealer needs to retain to keep the doors of their showroom open when they are only selling a few dozen cars a year. Buying well priced ‘trade’ stock is tough (dealers I spoke to were often bidding against other UK buyers on cars abroad) and if they can’t find it then the only alternative is to buy at ‘retail’ money and add the necessary profit margin. These margins will have to grow if the volume of car sales isn’t meeting the dealer’s expectations, and that will push the prices of cars up.
Given that the majority of classics in the UK are sold through dealers and not auctions, then should we expect to see prices continue to rise? Only time will tell, but to steal a line from Nigel Tufnel of Spinal Tap, despite last week’s predictions for the classic car market in 2015, I came away from the show feeling like the heat in the market could just get turned up to 11.
Edward Legge is Director of Commercial Development at Classic and Sports Finance