secretcollector

As so many of us read, there are literally endless threads here and on other forums discussing the massive run-up in prices for certain cars, often Porsches, over the past few years. Many commenters refer to the current period as a "bubble", with the inference that prices are about to begin an unpleasant drop. Almost always, this viewpoint is supported by the fact that through Central Bank policies around the world, money has been very available and historically cheap and that as soon as these CB's begin tightening, the ensuing rise in rates will cause the investors/traders/speculators to abandon the collectable car market for more traditional asset classes that will once again provide yields in line with historical norms.

While I agree with the fact that money has been easy and cheap, and that sometime in the near(er) future the CB's will act and reverse this, I don't feel that it has had any impact on the Porsche market, nor will it. The truly collectable Porsches (cars like the early RS, 959, very limited production 964/993's, CGT's to name some) have been undervalued vs. the broader market and have simply begun to be appreciated at a much higher level.

However, I could be wrong and the other pundits right, so I have one simple question for the community that to me, will solidify an answer one way or the other:

For those of you who have personally purchased a Porsche like I define above, or personally know someone that has (let's keep heresy and what you might have read in an auction report out of this), will that car (or cars) be sold simply because interest rates rise?

Looking forward to hearing thoughts on this one.

cgt04115

Ill take a stab with my opinion.

Money is cheap with interest rates at nothing, but who is financing a CGT, 959 sport, 964 3.3 Turbo LTW ect? Probably no one, so why would an interest rate hike change that? They didn't buy it for yeild, they bought it for fun and to store value in something tangible. The old way was buy houses all over the world. Well look at the drag that creates in the way of taxes maintenance ect.

People see whats coming in the way of future transportation. Vintage cars are a place to put money and you dont have to watch a daily fluctuation in value. You can enjoy it by looking at it and driving it. Its a hard asset with some level of inflation protection. Rich people always look to diversify. Add collectible cars to that list now.

Although car collecting was done with the uber high dollar cars like Ferrari 250 cars, prototype racers ect ect for decades, it was predominately done by the UHNW individuals and the greatest cars in history. Now that there is a very large audience the list of high dollar cars will grow as demand will ALWAYS outstrip supply through an extended period of time.

As cars become automated, lose all of the charm of the older cars, these things will only be sought after more by the wealthy. Driving a manual will be a long lost art form. Imagine the wonder these cars will bring to generations in the future. The internet will keep the knowledge flowing and I see no reason for a crash in the best of the cars long term.

Having said all of that, your run of the mill 911 is getting a bit out of control in price. I see 993 Carrera S cars quoted in the $150k range. That seems wayyyy off to me and I think that is where the bubble sentiments are coming from. I still believe a CGT at under a million is a bargain for the future. Its the pinnacle street vehicle.....

Bottom line IMHO, art has been in cultures in one form or another for millennia and cars are just a very recent addition worldwide. When you look at the stock of the best era for cars its probably from the late 50's to the mid 2000's. Some good ones arrive periodically but they are complicated and heavy.

I predict that going forward the top sports cars from this era will continue to be sought after for 100's of years into the future.........

NYC123

I think these conversations are very hard to have because first of all it is hard to even agree on what current prices are forget about future prices. I mean when you see a 512 M Ferrari asking 900k on EBAY , something like that which was 200k 12 months ago easily can create talk of a "bubble". However, once you find out that cars like that never sell or actually end up selling at a small fraction of the advertised asking price then the conversation I think can change. My point being I think to have this talk lets reference actual specific models and values. Car x might not be a bubble at 200k but it might be a bubble at 2mln.... I think a good example of what I mean is the white 20k mile 94 turbo S flatnose Marshall Goldman advertised for $2.3mln last week. (seems to be off the site now). When you see complete nonsense like that, it is not hard to see why people throw around the word "bubble". As a point of comparison a friend recently sold a very nice rare color low mile 94 turbo to a dealer in the low 200's range , so when you see a turbo S for 10 x what a 3.6 turbo just sold for its is again pretty easy to see why people are tempted to use the "bubble" word.

E-Man

Having bought one of the cars you mentioned above I will give you a simple answer, no I wil not sell if interest rates rise. I can't really see the logic in selling something that I enjoy to the point it's difficult to put into words because I can earn 25 to 50 more basis points in a savings account compared to what I'm earning today. I'm no financial genius but I think the way you frame the question may be just a little too simplistic. Raising interest rates a fraction isn't going to cause owners like us to sell, what people are afraid of is a domino or ripple effect over the entire economy. For example consumer credit will be more expensive and therefore consumer spending will decrease and we suddenly go into another recession for an example. With everyone watching rates so closely and believing that this is what will have the biggest impact on the economy and asset valuation, I would bet that Fed policy (interest rates)will have very little to do with what happens over the next few years. Most likely if there is a change in the trajectory of the economy it will be caused by something that very few people are paying attention to.

tmario

I wouldn't phrase it as a rate rise causing a sale of cars directly as usually collectible cars are not collateral for loans, but there could be a knock on effect from other areas.

Rate rises could cause asset declines in real estate for example, which ARE usually heavily debt laden, and could lead to liquidations. Eventually that hits at a personal level and the car collection would go before a home (that one lived in), for example.

Of course one never knows what exactly triggers the pricking of a bubble. Most people that "got it right" on the last one were wearing losses for a while before being ultimately correct.

Also, as another poster mentioned the best will always offer some protection, but they are not bulletproof. Back in the 90 car value "crash" 1962 GTO went from $12 down to around 4mm. The exact figures may be off a little but not worlds away. "Regular" cars became unsellable. So, yeah, a CGT is still going to be very valuable even in a crash, but more mass produced cars will suffer much more in relative if not absolute terms.

My 0.02. I just sold my 599GTO (and bought an LFA) not because I think it's going to crash but ultimately, I like to drive my cars and when they get too valuable it takes a bit of the fun out of it. Now I'm just looking for things that may be a bit off the beaten path not so much to earn a return but to enjoy driving them s bit more. Still enjoying my CGT but I could see selling that one as well at these prices.

nuvolari612

Everyone has a different agenda - CGT stays regardless of rates bubbles etc. there is nothing worthy anywhere near it's pice tag or panache.

wtdoom

This is a very interesting question . I think a lot of it may depend on why one bought the cars in question . The last few years I have gone back in time with my purchases with several blue chip classic Porsche road and race cars with some equivalent ferraris too . I bought these because I have always dreamed of them , I enjoy driving them so they are keepers . I didn't buy them as a financial commodity to trade etc and the ones I didn't bond with ( most notably the Enzo Ferrari ) I swiftly sold on . I watch the market with interest and although I see this as a different time to the last classic / car market crash a correction or drop in values MUST occur at some stage . I don't expect a halving of values for true blue chip vehicles , more a general correction and stabilisation of prices . Some Carl's like early 911 t and e models have been dragged up by the value of s and rs models these and other examples of artificial rises in value I expect to "correct" but that's about it .
Porsche is a unique proposition as I believe s, rs and RSR models were seriously undervalued for years compared to the Italian equivalent and some of the rapid rise in price has also been that "correction" but going the other way .
Those that extended themselves to buy cars on credit in the hope of making money may end up panic selling and flooding the market with cars , this too will affect prices but I still suspect genuine so called blue chip cars will always be safe for the long term owner . What goes up must come down but it will usually go up again . It comes down to how and why you bought these cars .

FLGT

While I am by no means an expert or close to one, I suspect when interest rates are historically low, some folks put their money in cars, not because they are financing them, but because other investments might not be having much return.

NYC123

all very thoughtful responses so far agree with them all.

richk

Good question and I am going to say no. I think the CGT and GT3 variants with 3 pedals are going nowhere but up. Here are my 3 favorites with 5 year price target. Low miles to me is under 10k miles.


2004 or 2005 CGT - low mile cars 1.3 to 1.5 million

1996 or 1997 993TT - low mile cars will be 350 - 450k

2007 0r 2008 997GT3RS - low mile cars be 300 - 400K

richk

I should never have sold this one...going to correct that mistake shortly.

TJF

I think the car culture is peaking
You have all the aging baby boomers who now have money saved up and see some cars as investments .

We have now video media such as top gear and Jay Leno's garage and YouTube... etc.
We have more car shows, Our Cars and Coffee.... This all fuels it the culture


All of this is added to the increase demand and therefore increased values for collectible and unique cars, as we moved out of the Banking crisis In the US less than a decade ago.

I think it will all hold pretty steady until there is some type of Economic catastrophe again. And there's always one of those on the horizon.

racingfan

wtdoom nailed it. I think the answer's mainly driven by the purchaser's intentions. Pure investment or pure enjoyment? If it's a little bit of both then I suspect as rates go up, those folks may be increasingly tempted to sell and re-allocate the capital. I will not sell if interest rates rise, no matter how high they rise. I bought my CGT, CS, and 6GT3 because of the sublime driving experiences they offer, not as investments. I know I cannot easily replace those driving experiences, so while I may add another car or two down the road, I have no intention of parting with the wonderful cars I'm fortunate enough to own.

MikeGT

If the cars are truly investments, most likely those investors know that over the LONG term, they will be fine - just like equities, real estate, etc. I've stomached two market crashes and just hung tight. Long term investors know that there will always be waves, but looking at any investment strategy over a long period always reveals a decent return. That's why we'd all go back in time to never sell what we did and buy as much as we can. I'll never sell my collection no matter what the market may do in the next few years. I know that by the time I can't drive them or at least see them, the values will be just fine. And just look at the enjoyment I gained by owning them.

golfnutintib

If you spend so much on cars that you would need to sell them in a downturn, you are truly a fool. Nuff said.