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Coronavirus and the classic car market

28 March 2020

With large parts of the world now shut for business and the majority of the classic car market suffering a similar fate apart from online, the worry for all participants in this market is what impact the virus will have now and indeed in the future. Any demographic analysis of the classic car market is likely to show that the majority of people who own or have an interest in these cars are aged 50 to 80 which immediately suggests that the people who buy these cars are now in some form of isolation to protect themselves from the virus. With an initial three week lock down in place for the whole country and a strong likelihood of a government extension to this time frame it seems all but certain that classic car dealers are facing a prolonged period of zero or very close to zero sales. This might well make survival for some traders very uncertain, especially those that have large overheads of a showroom and staff. There are of course the government bail out processes in place to assist with staff wages and the possible grants for those that have premises, but even then, the costs of running any such business are going to exceed what is available. This is going to place a lot of pressure on some incumbent dealers and after the classic car boom of the post credit crisis period many such dealers have set up and have continued to do so in recent months. The likelihood is that the longer this crisis takes to contain the greater the possibility that a number of dealers will shut up shop.

We suspect that the impact on the classic car market is going to be a lot greater than other areas of the economy which can be expected to recover more quickly once the restrictions start to ease. The likelihood is that until a vaccine is found many of the older community are going to greatly restrict their activities and interests until it is safe to do so. If a vaccine is 18 months away it could conceivably mean the classic car market does not start to regain traction until 2022 which is a long time for some dealers and auctioneers to get through. Unless a vaccine and a successful end to the crisis comes within a few months it seems likely that a number of companies will face difficult times ahead.

What now for classic car values?

Demand for classic cars has all but disappeared at present due to the lock down restrictions. A good many events have now been cancelled with much uncertainty as to when conditions will be right for events to be run again. This means there will little demand for cars at present and with supply continuing to rise as the number of unsold cars builds, we face a period where prices are likely to come under pressure. It is doubtful that prices will crash as we have already been through a period of correction and sellers will rightly see the current crisis as temporary and unlikely to cause a structural shift in demand or prices over the medium term. There will however be instances of some forced sales as some people find their finances under pressure and for buyers willing to take the plunge now, there is every possibility that some bargains will arise.

We have seen some media comment that prices will react as they did immediately after the credit crisis as people rushed to find safe havens for their money especially with low interest rates. In fact, we now have interest rates at the lowest levels in history, but we do not see the same scenario playing out. Classic car values have in our view peaked and they are more likely to gyrate around current levels with some continuing weakness in certain areas of the market such as some pre war cars whilst others such as hot hatches from the 90s will continue to find a stronger following. There will be no rush into classics as there was ten years ago.
We should also be mindful of what impact declines in other asset classes can have on the classic car market. World stock markets have hit bear market territory faster than at any other time in history and as people’s portfolios decline so will their willingness to spend money. The property market is also now in limbo although valuations so far have shown no stress mainly because there is no activity and we suspect property values will remain where they are for now which should mean little impact on activity in the classic car market.

It all comes down to how long the Coronavirus crisis takes to play out. If in one quarter’s time the peaks have been reached and we are moving towards a point of freedom of movement once again we should start to see most markets return to normality. If, however the crisis plays out for a prolonged period we can expect difficult times for all participants in the classic car market whether they be dealers, auctioneers or just enthusiasts wanting to use their cars.

Once certainty we do know is that like with every crisis, this one will come to an end and normality will eventually return. If you are in the market to buy a car there might well be good opportunities to bag a bargain and for those that simply have a gleaming classic waiting in their garage to be exercised, worry not as the world will eventually return to normal, we might just have to wait a while for it to do so though.