A global pandemic and signs of an impending economic depression are already slamming the automotive industry five ways to Thursday. Car sales are down, people are losing their jobs, and businesses are going bankrupt. We may be a meal away from financial Armageddon, which for some means it is a good time as any to buy an old Honda Civic Type R for RM300,000. Wait, what?

That isn’t a lone case. More recently somebody bought a Mugen Civic Type R for half a million Ringgit. If that wasn’t brave enough, someone recently paid a million ringgit for a BMW E30 M3 over an online auction.

This is some Last Days of Rome stuff going on. For all, you know currency itself may cease to exist by next Monday, and we will be back to trading rocks on Tuesday. Might as well make the most of that money while you can.

It isn’t just the current troubles that make these surging auction prices seem out of place. If you have been following classic car news, you would have heard murmurs that the classic car market has been experiencing a downturn since 2019.

As reported by Hagerty last August, the crème de la crème of high society classic car auctions, the Monterey Auction Week, experienced its single biggest year-over-year decline in auctions. Not only that, but total auction sales and sell-through rates for big-ticket lots also dived.

Hagerty might be only focused on the North American market, but considering the region’s appetite for classic cars, it serves as the best barometer we have so far. Luckily for us, Hagerty has a stock market-like indices that chart the price movements of classic cars. If its indices serve as any indication, six out the seven recorded indices have been charting a slide since mid-2019.

Everything category from Italian exotics, to British classics and American muscle cars, have all recorded a 10 per cent slide. 10 per cent might not sound like much, but when it is talking about average prices in the millions of Ringgit, a 10 per cent slide is a loss of between RM15,000 to RM1.5 million. The market for every category of classic cars has taken a beating, except one. An index Hagerty calls “Affordable Classics”.

Heaped into this index are cars like the Datsun 240Z, BMW 2002, Toyota MR2, and classic Volkswagen Beetles. The sort of cars that you could have picked up on the cheap three decades ago as a beater. Unlike its more prestigious counterparts, Hagerty’s Affordable Classics index has bucked the trend and steadily climbed in value.

There is a myriad of reasons why this is happening. However, you don’t need to travel to America to notice that modern classic cars are getting more expensive. In particular, modern classics that were built in the 1980’s to the mid-1990’s. Cars like the Honda NSX, Nissan Skyline GT-R, and the Toyota Supra. Cars that the old money doubted could have amounted to anything on the used car market. Cars that mean a lot to a new generation of car enthusiasts who are looking to buy their own dream cars.

This generational change in buyers might also explain the decline in demand for the more prestigious classic cars. Younger classic car buyers would gravitate towards cars that were a major influence in their formative years. Or prefer a certain era of cars that reminded them of their youth.

Many prestigious classics, like the million-dollar Ferraris that make auction headlines, appeal to an older demographic, a demographic that is advancing into their sunset years. Younger buyers, on the other hand, might not treasure these classics as much, or have the same sentimental value.

This shift has seen “optimistic” asking prices for modern classics crop up on the market. Last year an American dealer listed a pristine MkIV Supra for RM1.5 million. Likewise, last month a UK dealer listed its Subaru Impreza 22B STI for similar figures.

While both cars are yet to find willing buyers, it is just the tip of the proverbial iceberg of the level of speculation going on in the market. And with speculation brings a new, more ominous force for those who appreciate these classics – speculators.

It is no surprise that many exotics and prestigious classic cars are garaged and rarely ever see the open road today. Ever since affluent car collectors discovered that you could sell a car for a profit that cannot be taxed, as a car is considered a depreciating asset in the eyes of the taxman, the classic car market has experienced a gold rush.

Collectors and auctioneers trade classic cars like rare pieces of art. Valuators examine the heritage of the classic car’s maker, its rarity, and even the significance of its previous owners like they would do with a Picasso painting or an ancient royal artifact. To them, they are one and the same.

It is uncertain how much of the modern classic car market is driven by speculators, or if they have even taken notice. But it isn’t a question of if, but when.

As it stands, many believe that the more prestigious end of the classic car market is over-valued. Any savvy investor would avoid over-valued investments and look out for potential climbers. Car collectors will realise that a million-dollar classic Ferrari is only going to appreciate by a few per cent over a few years.

Adding to that, it is uncertain if they can find buyers for their Ferraris when it comes time to sell. A cheaper collector’s car would have more potential buyers too. So, guess where can they find those sorts of cars that have the potential to net a far healthier and easier return in the future?

Yes, you guessed it. Modern classic cars.  

The only saving grace modern classics have to save itself from the prying eyes of speculators is its reliability. The resilient engineering and nature of cars of the modern era have seen more examples survive that its vintage contemporaries. Its routine usage by previous owners and numerous numbers produced might dissuade prospectors who are looking for rarity and exclusivity.

Investing in cars in this climate of uncertainty sounds silly. But is it? The housing market is too expensive, the stock market is supported by a new overinflated tech bubble, and large swathes of the economy won’t be returning to normalcy for a while. At this point, a parked Mazda RX-7 Spirit R with an engine that needs 150,000km rebuilds looks like a more stable place to park your money.

We can only hope. As I have written about late last year, this is a worrying development if you fancy on getting a 90’s Japanese performance car to see out the end of the world. As it looks, most of us are already running out of money to do so.  

If you want to know more of how the classic car market has gone from being driven by enthusiasts to being packed by speculators, read The Motor Muse thoughts on how the classic car market has spoilt classic car motoring.