Interesting article about the collector car auction market.
Also interesting to read about how the tax code changes change the upper end of that marketplace.
(snippet copy. See link for entire article)
(copy)
By Rob Sass
Feb. 28, 2019
Five years ago, the classic car market had just completed a turnaround that left even seasoned observers surprised by its speed. The deep recession that began in 2007 had dealt the same initial blow to vintage car prices that it did to the Dow and to the real estate market.
The downturn erased four or five years’ worth of gains for collectible cars, by many estimates. But by 2014, most had fully recouped their pre-recession values, and the market has maintained an even keel.
There are some signs, however, that the good times may be coming to an end. A mix of factors is at play, including demographics, changes to tax laws and general uncertainty.
For auctions in 2018 and early 2019, the sell-through rate (the percentage of cars meeting reserve and selling) for million-dollar-plus cars has dropped about 20 percent from the previous year, according to Hagerty, a classic-car insurer in Michigan. That’s the lowest rate since Hagerty started tracking the statistic in 2008.
The wealthiest and most discriminating collectors may simply be taking a pass on the current offerings, or “it may be a sign that the savviest collectors are sensing a change in the tone of the market,” said Brian Rabold, vice president for valuation at Hagerty.
If the recent crop of cars isn’t persuading elite collectors to raise their paddles, the question then becomes why aren’t more owners of blue-chip cars selling them?
Cam Ingram, a collector and restorer in North Carolina, pointed to last year’s changes in Section 1031 of the tax code, which had allowed the capital gains tax on a sale to be deferred if the proceeds were used to buy another collectible — artwork, say, or cars.
“One factor that few people are acknowledging at the moment is the effect of the loss of 1031 exchanges,” Mr. Ingram said. “Top collectors were able to strategically play with positions in their collections to avoid realizing taxes on gains. Now they have to be far more disciplined. The change in the law is affecting both supply and demand.”
Also interesting to read about how the tax code changes change the upper end of that marketplace.
(snippet copy. See link for entire article)
(copy)
By Rob Sass
Feb. 28, 2019
Five years ago, the classic car market had just completed a turnaround that left even seasoned observers surprised by its speed. The deep recession that began in 2007 had dealt the same initial blow to vintage car prices that it did to the Dow and to the real estate market.
The downturn erased four or five years’ worth of gains for collectible cars, by many estimates. But by 2014, most had fully recouped their pre-recession values, and the market has maintained an even keel.
There are some signs, however, that the good times may be coming to an end. A mix of factors is at play, including demographics, changes to tax laws and general uncertainty.
For auctions in 2018 and early 2019, the sell-through rate (the percentage of cars meeting reserve and selling) for million-dollar-plus cars has dropped about 20 percent from the previous year, according to Hagerty, a classic-car insurer in Michigan. That’s the lowest rate since Hagerty started tracking the statistic in 2008.
The wealthiest and most discriminating collectors may simply be taking a pass on the current offerings, or “it may be a sign that the savviest collectors are sensing a change in the tone of the market,” said Brian Rabold, vice president for valuation at Hagerty.
If the recent crop of cars isn’t persuading elite collectors to raise their paddles, the question then becomes why aren’t more owners of blue-chip cars selling them?
Cam Ingram, a collector and restorer in North Carolina, pointed to last year’s changes in Section 1031 of the tax code, which had allowed the capital gains tax on a sale to be deferred if the proceeds were used to buy another collectible — artwork, say, or cars.
“One factor that few people are acknowledging at the moment is the effect of the loss of 1031 exchanges,” Mr. Ingram said. “Top collectors were able to strategically play with positions in their collections to avoid realizing taxes on gains. Now they have to be far more disciplined. The change in the law is affecting both supply and demand.”
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