DARWIN IS BACK: WILL THE MONTEREY AUCTIONS BE A GAME CHANGER FOR SELLERS?
Updated: Aug 26, 2019
Let's start by full disclosure. Yup, I'm a car broker with a vested interest in a healthy market and more sales that I can keep up with. Part of my day job is dissecting the consequences of news events pertinent to my business and adjust my actions accordingly. And with that I submit my thoughts about last week's auction action in Monterey, the subject of numerous news accounts, conjecture and outright misinformation.
Before I dive into the numbers, I'd like to comment that this year marked my 17th run as a Pebble Beach judge. The task proved equally challenging with a race for the three selected vehicles to earn their respective place finishes over the podium. Our Best-In-Class award fell to Paul and Cheryl Petrovich and their spectacular 1930 Duesenberg Model J Murphy convertible coupe. A real beauty. My thanks to fellow judges Steve Snyder and Nelson Thorpe for their keen knowledge and steady hands.
By concours day Sunday morning, however, our cell phones were bombarded with Shakespearean tragedies of blood drenching the auction podiums. Even the national news services dished out their own witches' brew by sacrificing the 1939 Porsche Type 64 auction snafu into some kind of larger-than-life event. I have no doubt that "a special committee has been formed to look into the matter."
Okay, sales volumes and lots sold were down from last year with some reports citing as much as a 34% drop. Average and median sell prices were also down along with sell thru rates and average high bids. What do you expect when the number of Monterey lots has more than doubled over the past five years and the mega-million-dollar cars were largely absent this year? As my colleague Gordon McCall would say, "The trees cannot grow to the heavens." Yet these so-called news agencies have also been quick to suggest that another 1990 and 2008 are upon us.
The Porsche bidding malfunction was strictly that, not a whit related to the relative health of the collector car market.
They seem to ignore that today's overall economic fundamentals are solid and the absence of speculators dominating the scene as was the case in 1990. The Porsche bidding malfunction was strictly that, not a whit related to the relative health of the collector car market.
In our annual Top 24 Monterey Auction Picks, 2019 results saw a total of $62M in bidding activity: $51M sold, and $11M unsold based on hi bids. Our grouping of 14 sold vehicles represented 20.8% of the total weekends' volume of $246M... not bad choices for a group of eight market junkies on an unpaid gig!
More interesting are the sold figures as a percentage of their respective presale estimates. The $51M of lots sold from our modest sample reached only 68.9% of the average estimates.
Friday's auctions pivoted into the abyss of low and no sales. By the Friday evening and Saturday time frames, smarter sellers, with this new learned feedback, ratcheted back their expectations.
Had the unsold lots found buyers at the respective hi bids, all lots would have achieved 84.4% of the average presale estimates. Friday's auctions pivoted into an abyss of low or no sales. By the Friday evening and Saturday time frames, smarter sellers, with this new learned feedback, ratcheted back their expectations.
A market-disrupting event can bring about a number of consequences, intended or otherwise. I would urge buyers to avoid becoming too emboldened and sellers to not panic. One robin does not make a spring and one auction weekend does not define a trend. Here's just a small sampling of a few record-setting sales that took place this year in Monterey:
The ex Bob Valpey 1931 Studebaker Indy racer hit a whopping $1.1M at Gooding, nearly double the estimate.
RM Sotheby's pegged a world record for a McLaren sold at auction, the 1994 F1 LM spec for $19.8M and just nudging lower end of the estimate.
Bonhams found a new home for a 1935 Pierce-Arrow 1245 Coupe at $151,200, dead square in the estimate range. Who said American classics are dead?
The weekend's auctions showed strong diversity and many more eye-popping sales than one would surmise from our friends at Bloomberg.
WHAT DOES THIS MEAN FOR SELLERS?
Sellers have a number of outlets for marketing their vehicles. The question is whether the weekend's events alters the priority of choices. Let's take a look:
ONSITE AUCTIONS. As a broker, auction houses are my chief competitor yet some vehicles just need to be seen in a competitive bidding environment. Two people duking it out in room full of cameras and free booze is seller nirvana. Case in point: my family's 1923 Model A Duesenberg. After several months of frustrating attempts to place the car privately, and my thin skin rubbed to the bone, off she went to the 2015 RM-Sotheby's Hershey auction where she sold for $100K over my expectations. Two years later, the vehicle clipped $400K a second time around. Auction houses are loath to take reserves but sellers' want protection if bidding peters out. There's transportation costs and ancillary fees to consider. The sale, or lack thereof, will be a highly public matter. When you sell at auction, be prepared to let it go! Today, I suspect that sellers will see less consignment bargaining than years past including lower reserves and more restrictive rules of acceptance. I also believe a shakeout is coming with respect to the number of auctions that will be able to endure these new terms of engagement.
ONLINE AUCTIONS. EBay Motors needs no introduction. It has proven to be an excellent marketing tool for my client's vehicles. Set a fixed price—not an auction—and wait for the inquiries to roll in. Do not, repeat, do not use the eBay auction format! Any resulting hi bid will become the perceived market value and crazy difficult to overcome in subsequent buyer discussions. Bring-A-Trailer (BAT) has grown like weeds to become the defacto alternative to eBay, onsite auctions and other selling formats. BAT seems to have achieved strong results and they employ a user comments system to help vett the merchandise. Therein lies the rub. Seller's run the risk of a rogue wacko posting erroneous comments that could kill a sale. Expect to be in front of your PC 24/7 for the seven auction days dealing with serious buyers and tire kickers alike, and there's the byzantine bidding format that I still don't fully understand. BAT charges a modest $100 per listing and a 5% commission to the buyer. Hemmings (aka Lemmings) has attempted to compete with BAT with the same lackluster results they have demonstrated managing their declining print base with the new world order. Fees run about the same as BAT yet their stock of vehicles and presentation leaves something to be desired.
ONLINE CLASSIFIEDS. I've had good results with AutoTrader and a number of niche sites catering to a specific marque or era. Roy Spencer's excellent Mercedes Heritage hits members' mailboxes with the latest (free) seller ads. The Jalopy Journal HAMB forum is rich with vintage rods for sale. Club sites are another source though keep in mind that they are largely populated by armchair enthusiasts still living in their parents' basements. Craigslist will attract the Walmart crowd though worth the effort if only to grab that one qualified buyer. The bigger the site, the more knuckle heads and spam so be careful when hitting the Reply button.
PRINT ADS. I just don't see the point.
DEALERS. Many dealers will take vehicles on consignment to display in their showrooms. Commissions are all over the place but figure on 15% plus expenses. The benefit for sellers means more time with the family while the dealer keeps the tires inflated and slugs it out with buyers. My good friend Mark Hyman has done an admirable job building his business into a world class operation including owned inventory and consignments.
BROKERS. I saved the best for last! Think of us brokers as real estate agents marketing your home. We handle all the marketing and deliver qualified buyers to clients, negotiating and closing. Commission rates, as with dealers, vary widely with 10% being the approximate average plus expenses. Find a broker with seasoned grassroots marketing skills, marque knowledge, online savvy and a great Rolodex. Before you consider that a broker's fee may be excessive, keep in mind that auction bidders limit their top bids by the anticipated calculated buyer's fee, typically 10%. Also note that posted auction results include both buyer and sellers fees—approximately 20%—leaving sellers netting around 80% of the "all in" figure.
DARWIN IS BACK!
It's much too early to tell whether the collector car market is entering a new phase or Monterey was an aberration. In fact, it may prove strictly to be an "auction thing" and nothing more.
Some have suggested that Monterey lacked sufficient buyers for the lots on offer. Not so. Buyers are awash in cash, knowledgeable and ready to plunge.
A few issues are certain though: Consignments need to be priced to sell. Some have suggested that Monterey lacked sufficient buyers for the lots on offer. Not so. Buyers are awash in cash, knowledgeable and ready to plunge. This year marked a tipping point where high estimates and unrealistic reserves overcame sales. "Glory" lots that act as window dressing and not really for sale only fuel this dilemma. Prior year auctions results were heavily slanted by multi-million dollar lots which were not in abundance this year. In fact, vehicles under the $75,000 mark did pretty well.
Will a shakeout occur in the collector car auction market? Maybe it's time. Darwin is back and Natural Selection is now the order of the day!
I hope the above adds some clarity to an otherwise perplexing time in the collector car marketplace. I look forward to reading your comments below. Meanwhile, I just sold another fun ride!