Why are classic and muscle car prices so high?

Why are classic and muscle car prices so high?

Excluding brand new cars like the Veyron, over 60 second hand cars sold for more than US$1 million dollars in 2007. The highest price paid was over US$9m, approaching the US$9.8m paid in 1987 for a Bugatti (though, not if you adjust for inflation).

What’s causing this rise? Markets go through phases. Savvy investors put their money where the big returns are. The property market worldwide has looked overcooked for 3 years, and in America it’s all tumbling down with the subprime mortgage crisis, and mortgagee foreclosures at record highs. It’s no better in the stock market. We’ve entered a bear market, and even blue chip stocks are volatile. Even investing your money in relatively safe debentures and high interest vehicles has come unstuck with finance companies collapsing left, right and centre.

So you’d think that all things automotive might be buoyed by the halo effect of classic cars, but it’s not the case. As an example, Harley Davidson shares (NYSE: HOG) are down 50% from their high – a product which people buy as a luxury item, like a collector car.

And petrol is an increasing concern. The oil companies’ shares are holding up very well globally, as are mining and precious metals stocks. Back in the ’70s when the oil crisis hit you couldn’t give away muscle cars that are today worth 7 figures, but that’s not the case today. Typically when people are panicking about global markets there’s a rush to items with rarity, be they art, classic cars, or classic guitars. This time it’s the turn of the car. Their image has been bolstered by several movie remakes (Gone in 60 Seconds for ‘Eleanor’, The Dukes of Hazzard for the Dodge Charger, etc), and baby boomers with disposable income are hitting retirement and want a toy.

Can this market go on? Probably not. It’ll reach a peak like Angora goats, internet domain names and personalised plates, then will drop back. The savvy investors will have taken the easy money and moved onto the next thing.

Excluding brand new cars like the Veyron, over 60 second hand cars sold for more than US$1 million dollars in 2007. The highest price paid was over US$9m, approaching the US$9.8m paid in 1987 for a Bugatti (though, not if you adjust for inflation).

What’s causing this rise? Markets go through phases. Savvy investors put their money where the big returns are. The property market worldwide has looked overcooked for 3 years, and in America it’s all tumbling down with the subprime mortgage crisis, and mortgagee foreclosures at record highs. It’s no better in the stock market. We’ve entered a bear market, and even blue chip stocks are volatile. Even investing your money in relatively safe debentures and high interest vehicles has come unstuck with finance companies collapsing left, right and centre.

So you’d think that all things automotive might be buoyed by the halo effect of classic cars, but it’s not the case. As an example, Harley Davidson shares (NYSE: HOG) are down 50% from their high – a product which people buy as a luxury item, like a collector car.

And petrol is an increasing concern. The oil companies’ shares are holding up very well globally, as are mining and precious metals stocks. Back in the ’70s when the oil crisis hit you couldn’t give away muscle cars that are today worth 7 figures, but that’s not the case today. Typically when people are panicking about global markets there’s a rush to items with rarity, be they art, classic cars, or classic guitars. This time it’s the turn of the car. Their image has been bolstered by several movie remakes (Gone in 60 Seconds for ‘Eleanor’, The Dukes of Hazzard for the Dodge Charger, etc), and baby boomers with disposable income are hitting retirement and want a toy.

Can this market go on? Probably not. It’ll reach a peak like Angora goats, internet domain names and personalised plates, then will drop back. The savvy investors will have taken the easy money and moved onto the next thing.

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