How will the COVID-19 pandemic affect the value of your car? The answer, as in so many cases, is it depends. Demand has clearly slackened for new cars, but at a time when many are feeling the pinch, the used car market can often be relied upon to step up. While new car sales fell by 52.3 percent in April, the fleet used car sector in Australia was also hurting.
“We’ve seen a mass exit of trade buyers on the back of minimal enquiry levels; many buyers have been sent on leave,” said Brendon Green, General Manager of Motor Vehicles at Pickles auctions.
“Average sales price across every single brand/make are down between 10-20 percent. Surprisingly, units sold to private buyers have doubled during that period as they hunt down high-quality assets being offered in the public auction lanes by our government, financier, corporate and not-for-profit vendors with adjusted reserve levels,” he said, adding: “...the recovery of the used-car market will be a very slow and drawn-out process, most likely taking months and months.”
While fleet managers are clear about the challenge they face, the classic-car market is less so. Hagerty has reported increased traffic to online auctions, but in April its rating of the strength of the collector-car market dropped nearly two points to 60.6, its lowest rating in eight years.
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Of Hagerty’s main indices, Affordable Classics was showing signs of growth, German Collectibles holding steady, and 1950s American and Muscle Cars showing the steepest decline. The erosion of the overall Market Rating is part of an industry correction since the highs of mid-2015.
Ed Callow from online auction site Collecting Cars has also seen traffic growth onto the platform. “Sales are faring very well indeed. March was previously our best ever month, and April has now surpassed that,” he said.
“In terms of the broader market view, people need to realise where we were before the word ‘coronavirus’ appeared on the news. There’s going to be a temptation for some people to blame every ‘no sale’ on this crisis, but the reality is that many sellers simply have an outdated perception of the market.”
Christophe Boribon of Shannons auctions concurs. “To date we have not seen a big change in the collector-car market here in Australia; there are still as many vehicles for sale through the classifieds and online at pre-COVID19 prices,” he says, noting interest in the company’s new Online Timed Auction system. “I think we will have a better indication and actual facts to report on the state of the market later in the year.”
Bring a Trailer, the US-based weekly auction site that specialises in modest-money classics, has reported that the first week in April saw its biggest traffic day ever, with four of its five busiest days ever also recorded that week. The virtual tyre kickers are out in force, and among them are people willing to part with their money.
While the market for affordable classics is thriving, the near-new supercar market could prove to be more problematic. Asking prices haven’t changed markedly but demand is tapering. The net effect of this is that within the next 12 months, a glut of leased and financed supercars will likely arrive on the market. Supply will outstrip demand and, as a result, depreciation looks set to accelerate significantly, a situation exacerbated by oversupply in recent years from manufacturers such as Ferrari, Lamborghini and McLaren. Even the values of cars once thought of as gilt-edged purchases have suffered. Typical US auction values of the Ferrari 458 Speciale have softened by around 15 percent over the past two years.
At the top end of town, million dollar-plus blue-chip investment vehicles have seen prices frozen and, like gold buying, this represents a relatively safe haven for money in these volatile times.
Dave Gooding, founder of Gooding and Co auctions, talks of prices for high-dollar vehicles being “robust”. RM Sotheby’s 69 percent sell-through rate and US$13.7m (A$21.4m) take at its March 20-28 online auction is broadly in line with its live events.
A 1996 Porsche 993 GT2 sold at the auction for US$891,000 (A$1.39m). The last 993 GT2 to run through RMS, in October 2018, made US$643,000 (A$1m), showing that, for the right cars, the market is anything but tanking.
For the average Aussie motorist looking to trade up, the lack of equity in used stock is likely to be partially offset by dealer discounting on new cars. The cost to change isn’t going to be significantly different. But, right now, take comfort in the fact that a Tucson could be a better home for your money than a Tributo.