Picasso or Ferrari? Comparing the classic car and art markets

By Dr Vincent van der Vinne, author of Investing In Cars

When there is talk about classic cars, they are sometimes compared with art – this usually happens in two ways. Owners or enthusiasts say, for example, that a certain car has a very nice body or other aesthetic quality, and that they consider it as a work of art. Others, such as professionals in financial sectors, also make the comparison. In financial publications, classic cars are often discussed in relation to art in a very different way. Then one looks at the returns on investment, as cars are mentioned in the same breath as fine art, antique furniture, wine, whiskey or watches. Looking at the data alone, one comes to the conclusion that the yields on cars were higher from the year 2000 up to 2015 than on the other asset types. Looking at the returns on invested capital, this is a very different view of the comparison between art and cars.

Let’s make a comparison between the art market and the market of classic cars, by looking at the annual turnover in each sector. Every year reports on the art market are published, which include the total turnover. The bar graph below shows the global turnover of art from 2002 onwards, which reveals that sales declined somewhat around 2003 and then increased strongly. In 2008 and 2009 there was a period of stagnation, after which total turnover increased.  Beginning in the second half of 2015 and into 2016, the sales dropped  as prices declined, particularly in the top end of the art market. A recovery took place in 2017 and it is expected that the art market will pick up further still this year as confidence in the market is moving in the right direction.

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Total turnover of art market, 2002-2017, Dollars in billions

This confidence is based on economic growth. Research has shown that the art market follows the financial markets, with a delay of about a half to a whole year. The financial markets are again influenced by, among other things, political uncertainties. Due to a slowdown in the economy and political uncertainties, the art market fall in 2016. Due to economic growth in 2017, the art market once again gained ground. This despite political uncertainties, such as the policies of Donald Trump and the course of the intended Brexit.

Reports such as those on the art market are not published on the market of classic cars, yet a comparison can be made. The picture of the total sales in the global art market can be compared with the of the number of cars auctioned in recent years for more than a million dollars (here we are talking about cars that are at least 10 years old at the time they were auctioned). This number also increased strongly in the past 20 years. Starting from 2003 the number of cars sold at auction over a million dollars rose gradually. In 2008 were that more than 80 cars, after which there was a period of stagnation but with almost 40 cars sold in excess of one million dollars in 2009, that still tops the amount sold each year from 1998 to 2006. Starting from 2010 there was an increase again and in 2012, for the first time in history, more than 100 cars were auctioned above a million dollars. The year 2013 went well beyond that figure, as did 2014 and 2015. In these last two years, there were even more than 200 cars sold for more than a million at auctions. Just as in the art market, there was a decline in 2016, however a year later the number was again just over 200. This year will probably come close here again – both bar graphs thus show similar levels of development.

As we dig deeper, we can see even more similarities with the art market. The highest prices paid for art and cars continued to rise. This was especially true for paintings with a value of more than 10 million dollars. Conversely, there was little positive to say about the prices in the lowest market segment (artwork valued up to $5,000) and as a result, the gap between the top segment and the mass market segment became increasingly pronounced. In 2017, approximately 1 per cent of the paintings at auctions were sold for more than one million dollars, yet they accounted for more than 60 percent of the market. A minimal percentage of paintings sold for more than 10 million dollars, which accounted for a share of more than 30 per cent in the total auction results. Against this number we can see that more than 60 per cent of the paintings were auctioned for less than $5,000 dollars and these accounted for just 1 percent of the total sales!

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Number of cars auctioned over a million dollars

1934 Hillman Aero Minx, auctioned by Bonhams in September 2018 for £ 13,833 photo Bonhams

The increasing gap in value also takes effect in the classic cars market. Whether it’s Fords or Wolseleys, or other mass-manufactured cars from the 1920s to the 1970s, these cars once enjoyed great interest from enthusiasts. Today, however, they attract few interested parties and have, in comparison to other cars, become cheaper. Of course, sporty looking cars and the sports cars produced in larger numbers from the 1950s and 1960s often increased in value but usually the largest increase in value has taken place among the special sports cars, which have been at the top of the market for the past 30 years – such as the Ferrari 250 GT SWB California Spider and 250 GTO. Compared to other sports cars, these cars have increased in value by a far greater degree. In 2000, a beautiful Jaguar XK140 DHC cost approximately £45,000. In 2017, the highest auction price achieved was a little over £160,000 (just under quadrupling in value). In 2000, a Ferrari 250 GTO was sold for $8 million. Earlier this year, a 250 GTO was auctioned for more than $48 million and another was sold for an even higher amount. The auctioned car has undergone a six-fold increase in value and the other, privately sold, car became almost 10 times as expensive as the 2000 sale.

We are experts at high end car finance
We are experts at high end car finance

Left: Highest auction results of a Jaguar XK140 DHC Right: 1955 Jaguar XK140 DHC, offered by Bonhams in July 2018 for £ 120,000 – 140,000 photo Bonhams

We are experts at high end car finance
We are experts at high end car finance

Left: Highest sale results of a Ferrari 250 GTO Right: 1962 Ferrari 250 GTO, auctioned by RM Sotheby’s in August 2018 for over $ 48 million, photo RM Sotheby’s – Patrick Ernzen

As mentioned, there are no exact figures on the share of cars auctioned above a million dollars coupled with the total turnover at auctions (which we do have for the art market). We do know, for example, that earlier this year RM Sotheby’s offered 150 cars at auction. The cars that were sold jointly generated a total amount of almost $160 million. The three most expensive cars (1 per cent of the overall offering),  generated nearly $80 million dollars – amounting to half of the turnover. A cautious conclusion could be that the market for classic cars also resembles the art market in this respect.

1963 Aston Martin DP215, auctioned by RM Sotheby's in Augsut 2018 for over $ 21 million, photo RM Sotheby's - Simon Clay

 

Art collectors are often focused on paintings from certain periods of time. Currently, the greatest most interest is in Modern Art, created by artists born between 1875 and 1910 and to Post War and Contemporary Art, made by artists born after 1910. In 2017, these two categories had a market share of almost 30 and 45 per cent respectively. Impressionist and Post-Impressionist Art, created by artists born between 1821 and 1874, and Old Masters had a combined market share of less than 30 per cent. These market shares corresponded to the shares in value of the total turnover at art auctions.

However, a nuance must be applied here. This distribution is influenced by the size of the offering and its quality. Real masterpieces of Old Masters, for example, are not often offered at auction, and is therefore a category with a small market share and a small part in the total sales. However, when such paintings are offered they are sometimes sold for very high amounts – sometimes extraordinarily high. The most expensive painting sold at auction was by Leonardo de Vinci (achieving a staggering $450 million).

The top of the art market is relatively broad. For paintings by Paul Cézanne, Paul Gauguin, Vincent van Gogh, Gustav Klimt, Pablo Picasso etc, it’s perhaps no surprise that high prices are paid. In an overview of the most expensive 50 paintings, more than 20 different painters are mentioned, including seven works by Pablo Picasso.

1964 Shelby Cobra 289, auctioned by Bonhams in September 2018 for £ 1,359,000 photo Bonhams

 

Of course, the history of cars does not go so far back in time but here too we see that buyers are particularly interested in relatively young cars. The most expensive cars are usually the cars made in the years 1955 to 1970. See the overview of the 75 most expensive auctioned cars that JBR Capital previously published. Cars made before 1940 have less interest and even the interest in cars made between 1945 and 1955 seems to have declined in recent years, given the price development of a number of examples. In comparison with the art market, the top 75 of the most expensive classic cars contains far fewer brands; there are just 12. Ferrari is perhaps the ‘Picasso’ by comparison to the art market, represented in the top 75 with no less than 40 cars. The top end of the market is evidently is much narrower in the car market.

What can be concluded from this? There are similarities between the art market and the market in classic cars. It is to be expected that, following the art market, the gap between the most expensive cars and the large number of less expensive cars will increase. We should not write off the possibility that cars will be sold for $100 million over the years. One could expect continued price rises of the most special cars but a group of other sought after but more available cars can also appreciate in value. The number of cars in value between $10 to 20 million is also expected to increase, but the appreciation will not only take place among the cars made from 1955 to 1965, which are currently the most sought after. We should expect that shifts in demand will take place, caused by changes in interest among collectors. More about that next time….

1974 Jaguar E-Type SIII Commemorative, auctioned by Bonhams in September 2018 for £ 195,500 photo Bonhams

 

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