JAN 21st 2015

Edward Legge looks beyond the Scottsdale auction week headlines

Last week’s Scottsdale auctions were always going to be important. Even excluding the mighty 2000-lot Barrett-Jackson sale, there were still hundreds of cars crossing the auction block in the hands of some of the world’s most high profile auction houses. Their PR teams had been banging their drums for weeks in advance and we were all set for a storming start to the classic car year – but did we get it?

If you have read about the results in the usual haunts of this kind of information, you will almost certainly have come to the conclusion that we are set for another year of rising values and world records. The media has been regurgitating the usual puff – the top ten figures achieved (big numbers, especially in dollars), Ferrari leads the charge, world records achieved (is ‘the most expensive car sold in Arizona’ recognised by Guinness?), etc etc.

“more cars are selling but fewer are making the money expected”

Searching through years of spreadsheets trying to making sense of auction results isn’t much fun for journalists, so it’s much easier to copy and paste whatever arrives in your inbox from the auction press officer. One of the things that many commentators haven’t yet figured out is that auction house estimates are given without buyers’ premium but the results are usually given with them added which often gives sold lots a welcome 10% boost (on average) into the made-over-estimate zone. Finish up by presenting the figures in dollars rather than GBP and everything looks nicely rose-tinted.

The reality was far more interesting and there was one conspicuous trend. The number of cars that sold below estimate rose quite dramatically – in fact, if you include the lots that sold in the lower half of the estimate as well as those that didn’t make the estimate at all but sold anyway, the percentages leapt from 40% (of the lots we monitor at Classic & Sports Finance) in 2014 to nearly 70% for the 2015 Scottsdale auctions.

“it’s easy to forget that, in the UK at least, the vast majority of the 50,000 or so pre-1990 classics that change hands every year are not sold at auction”

Intriguingly the sell-through rate at Scottsdale rose too this year, breaking through the 90% mark – so more cars are selling but fewer are making the money expected. I’ll leave you to make your own conclusions on what this actually means, but there is no doubt that the estimates and presumably also sellers’ expectations were too high. The good news is that prices were still very strong, although some models such as the Ferrari Dino looked like they hadn’t made much ground since the 2014 Scottsdale results – if you’ve been waiting for the bubble to burst then I wouldn’t keep holding your breath.

Auctions are the most visible part of the classic car market and, with their big budget and joined-up marketing, it’s easy to forget that, in the UK at least, the vast majority of the 50,000 or so pre-1990 classics that change hands every year are not sold at auction – so it would be a mistake to judge the health of the market on auction results alone. As it is, the strong prices achieved in Scottsdale are generally in line with UK dealer sale prices – even if owners and sellers would like a bit more.

Edward Legge is Director of Commercial Development at Classic and Sports Finance

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