For Sale by Boomer: Hagerty's Rob Sass examines the future of the collector-car industry.
A demographic shift looms: Some 76 million baby boomers will soon reach
retirement age, crushing the health-care system and the social safety
net with their massive numbers. But we have a greater concern: Who’s
going to buy all their cars?
“I think that boomers are taking a more practical approach to baggage.
We want to lighten our loads sooner,” says Charlie Kuhn, a 52-year-old
collector from the Chicago area. “Guys not much older than me are
selling because their kids aren’t interested. I’m already thinking about
downsizing.”
The best estimates we have at the
Hagerty Group,
which sells classic-car insurance, peg the number of collector cars in
the U.S. at roughly 5 million, of which 58 percent are owned by baby
boomers, or those born from 1946 through 1964. Our data says that the
median age of collector-car owners is 56 years. The oldest boomers are
approaching 70, and their interest in the hobby is starting to wane. We
won’t see a generation of similar size until the so-called millennials
hit their peak earning years in a few decades. It’s questionable whether
they will care about the cars of their grandfathers and
great-grandfathers—or any cars, for that matter.
Confusing the issue further is the fact that the collector-car market is surging right now. Last July, a
1954 Mercedes W196 racer
crossed the block for $29.6 million, smashing the old record for a
price paid at auction by more than $13 million. Then in August, a
’67 Ferrari 275 GTB/4-S NART Spyder
took in $27.5 million, the highest price ever for a road car. However,
for all those blue-blood auction results, and some hot niches within the
hobby as a whole, there are far more examples of mundane Detroit iron
sitting in the garages of graybeards. A vast majority of collector cars
in the U.S. are, predictably, American—some 80 percent, according to
Hagerty data. It’s this backbone of the hobby that is likely in trouble.
We at Hagerty maintain a stock-market-style index for various sectors of
the classic-car market. The one for 1950s American classics is
precisely where it was in January 2010, indicating that demand for
formerly appreciating blue chippers, such as the 1955–57 Chevrolet Bel
Air, has likely peaked [see above]. Even the ’55–57 Thunderbird
two-seaters—once considered the bluest of blue-chips—are struggling.
“They’re astonishingly cheap now,” says Bob Lichty, a Canton, Ohio,
dealer who’s been part of the classic-car industry for about 40 years.
“The guys who wanted them new are starting to age out of the hobby. A
’60s ‘Bullet Bird’ convertible is easier to move now.”
As we speculate about how the collector-car market might change in the
next two decades, it’s helpful to consider some history.
Car collecting
traces its roots to the Great Depression, which extinguished grand
American marques such as Auburn, Cord, and Duesenberg and ended the era
of bespoke coachbuilding. Having saved western civilization during World
War II, members of the Greatest Generation turned to saving America’s
prewar automotive heritage. They realized with startling prescience that
the “classic era,” as it became known, represented bygone automotive
craftsmanship. They collected, preserved, and restored these cars and
started clubs such as the
Classic Car Club of America and the
Antique Automobile Club of America.
On the whole, the World War II generation was a good steward of the
hobby it created,
collecting the aspirational cars of its youth in a
pattern that collectors have followed ever since.
And so it went until the early 1970s, when the collector-car
auction business began.
Prices for prewar cars rose steadily until the
late 1990s when they hit the wall, in part because of oversupply. As the
Greatest Generation aged, they scaled back by selling off collections.
And as more collectors began to die, the market for prewar cars dried
up. The stagnant prices of ’50s American cars hint that history may be
repeating itself.
“As different generations age out, their cars do, too,” says dealer
Lichty. “While the owners may die, the cars don’t. They don’t become
worthless, but there’s a shift in the types of people who buy them and
the types of collections where they go.” The Cadillac V-16s and
Duesenbergs survived the shift from the World War II generation just
fine, Lichty explains, but ordinary mid-1920s and ’30s cars, such as
Buicks and Dodges, are stone cold right now. “They’re certainly not
worthless, just hard to get rid of,” he says.
Some baby boomers did embrace the classics of their parents’ era,
rightfully recognizing them as objets d’art and pieces of history. This
was helped by the sheer volume of boomers, enough to absorb the best
collector cars extant while also preserving the cars of their own era.
But we shouldn’t expect this phenomenon to be repeated. Not only has the
sheer volume of collector cars grown, but the next generation in the
line of succession, the so-called Generation X, isn’t as large or as
enthusiastic as the boomers.
Kuhn, the Chicago collector, says: “I own a ’34 Buick. It was built 28
years before I was born. I like it because my dad liked them. But our
children aren’t developing an interest in collector cars. There are too
many things going on to capture their attention: travel, sports, the
internet, and social media.”
One possibility is that the European market could absorb many of the
boomers’ cars. Michael Sheehan, a Los Angeles–based Ferrari broker, says
that “50 percent of my sales of 1950s and ’60s Ferraris are to European
buyers.” Most of the cars go to England and are registered there,
Sheehan explains, because the U.K. taxes historic cars at 5 percent,
versus 30 percent for the EU. “Europeans are looking for places to park
tax-free money, and collectible cars are a particularly wonderful place
to do it.”
But there are only so many cars that can go to Europe, where anti-car
sentiment and corresponding legislation continue to grow. And in China,
where incomes are swelling, the government has banned all cars older
than 15 years, making importation extremely difficult. Even if we can
count on Europeans to absorb some of the boomers’ cars, outside of the
curious Scandinavian predilection for Yank tanks, Europeans seem most
interested in repatriating their own automotive heritage. For example,
early Porsche 911s are white-hot right now.
Tastes change, a fact that will likely also affect the hobby. While
today’s collector-car market is dominated by mostly original cars and
more-or-less accurate restorations, the future may be about
restomods—old cars with modern equipment. Heretical as this may be to
some, anecdotal evidence already suggests that restomod buyers tend to
be younger, which makes sense. Gen Xers and millennials don’t work on
their cars as much, with high-school shop classes having been largely
eliminated just as computerized complexity made self-wrenching more
difficult.
The restomod market is already strong today thanks to the reliability
that goes along with replacing 50-year-old guts with something newer.
So, too, is the market for clean, complete cars ready to accept a crate
engine and an automatic transmission. A declining number of drivers can
even operate a manual, which brings up another likely change for the
hobby: automatics getting the price premium over manuals.
Car collecting as a pastime won’t fade away—horses still enjoy an
enthusiastic following more than 100 years after being displaced by the
car. But the hobby will certainly evolve. The internet continues to
transform it, ameliorating the scarcity of parts, bringing owners
together to share information, and increasing the supply of cars. Many
of the old rules about what defines a collector car and the relative
values of different types are likely to be challenged. The Holy Grail
or Hemi ’Cuda of the next generation may well come from abroad—an
E30 BMW M3
or an Alex Zanardi–edition Acura NSX. One thing won’t change, however:
The happiest people in the hobby are the ones who buy what they like
first and let the market worry about return on investment.
Rob Sass is VP of content at Hagerty, the collector-car insurance and services company.
Source: http://www.caranddriver.com/features/baby-boomers-created-the-classic-car-marketand-could-crash-it-feature
