Recession Ahead: Sell Your Car Now!

We’re at the tail end of an exotic and collector car bubble. If you’re wondering how it started, it’s the pandemic stupid (no offense). When COVID-19 arrived from China, fine dining, five-star travel and luxury retail therapy disappeared. Wealthy enthusiasts poured “saved” money into exotic and collector cars. High-end car prices increased every week. Selling a serious car for serious money took me 15 minutes. This month, moving the metal takes three days, minimum. Depending on the car, prices are softening like a stick of store-bought butter on the kitchen counter. More evidence of a bursting bubble?

I drove by my local Lambo dealer yesterday. Three box fresh $225k Lamborghini Urus (Uri?) sat on the front line looking for a home. Dealer premium? What dealer premium? I had a buyer lined-up for a 1988 Testarossa with 32k miles, selling below retail. The deal was as good as done. And then . . . recession talk. “The economy sucks,” he said. “I don’t want to have to lie to my friends about how much I paid for my car.” That’s how bubbles burst: no one wants to be “that guy.”

Nothing new there. Sherman set the wayback machine for February 1637. That’s when insanely rich Dutch tulip traders woke up to discover they couldn’t find anyone to pay big bucks for tiny bulbs. The demand for the flower collapsed. Prices plummeted like a rock thrown into a deep dark well. The poster child for speculative bubbles was born, christened “tulip mania.”

I know: exotic cars are not tulips (or NFTs or obscure cryptocurrencies). High-end automobiles have inherent value! They’re a great way to show the world you’re a man of wealth and taste. You can’t take a cryptocurrency out for a Sunday drive. Yes but . . .

If you don’t think there’s been exotic car “mania” you haven’t been paying attention. The Lamborghini Countach broke the $1m mark without breaking a sweat. As commentator Jack Danoun pointed out, the Carrera GT that went for $2m was a new kind of nuts. Rare muscle cars hammered for major money. Porsche Slantnose Turbos were suddenly made of unobtanium.

The intensity that exotic car buyers brought to the marketplace has been astounding. They may not have said it out loud, but I heard it in their voices: Find me the right car quickly Tony! I don’t want to miss out! As the U.S. economy falters, the script’s flipped. Sell my car now Tony! I don’t want to miss out! Right answer! The bursting bubble is inevitable.

High-end automobiles are an asset, not an income generating investment. When the economy is booming, wealthy people buy assets with money generated by investments. When the economy is in recession, they stop buying assets. Especially assets that cost money to own. A high-priced exotic sucks-up cash to garage, maintain and, especially, to insure. Every mile added to the odometer diminishes value. Which brings to mind three familiar words: look out below!

This is hardly the exotic car market’s first demand dirt dive. In 2006, the price for desirable cars ascended heavenwards. When the financial crisis of 2007 – 2008 hit, descending prices sent not-so-savvy speculators straight to hell. A lot of people remember what happened 14 years ago. Those in-the-know are now either hanging fire, waiting for the exoticcarpocolypse to pick-up a bargain; or selling ahead of the exoticcarpocolypse, to people who don’t see that the end is nigh.

They’re not wrong. If you wait too long, you won’t be able to sell your car or auction it for what I call reasonable money (what you paid for it plus a premium of some sort). How do I know this? I’m seeing prices recede for off-market exotics. I’ve been offered rare cars from dealers that were too busy retailing in May to call. A-list cars aren’t crashing, but their upward trajectory has levelled off. That tells me the market is heading south.

Either hold your pre-loved automobile for the next four years – for when the market recovers – or sell it now. One last thing: you won’t see much downward movement on public auction sites like Bring A Trailer. Look closer. High bids arriving four days before the auction ends? Hmmm. Some might say that these sites make money from deceitful market manipulation, but I couldn’t possibly comment. Except to say this: call me before it’s too late. It’s time to sell.