A Good Time to Buy a Classic Car?

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People who’ve longed to buy a classic car may be thinking now is a great time to go shopping for one.

Maybe.

But classic cars are not like new cars or even used cars. Classic cars are an indulgence while new/used cars are necessary appliances. No one needs a classic car. Those who own them tend to be people who could afford the indulgence; who own one in addition to their “appliance.”

It’s certainly true that some of these people will need to sell their classic car to raise some money, Because Corona – but the people who buy them will necessarily be people who can afford the indulgence.

Such still exist and will continue to exist, in spite of Corona.

This will keep prices up, probably. That and the fact that the supply is inherently limited.

Even before Corona, classic muscle car prices were so high they priced most average people out of the market. Even fairly run-of-the-mill cars like my ’76 Trans-Am sold (and seem to still be selling) for about what you’d pay to get a new Camaro or Mustang. Which is a lot of dough for most people and – unlike a new or used car – harder to finance and much harder to justify to the wife.

Especially when you’re unemployed – Because Corona.

For these reasons, it is doubtful there will be many deals on classic cars – even if the economy collapses. The rich will always have money – and be able to indulge.

However, there will be – there are already are –  spectacular deals on new and used cars.

A tsunami of new car inventory has built up during the past two months of government-decreed “lockdown.” Dealerships are heavy with cars they haven’t been allowed or able to sell – and are now desperate to move that accumulated inventory.

For two reasons:

First, the money. Not theirs. The money they owe. Which is piling up, just like the cars on their lots – or rather, because of the cars piling up on their lots. Dealers take out loans to get their inventory; there is debt outstanding on every car they’ve got on the lot – revolving debt that rinses and repeats with each billing cycle. Every billing cycle that goes by without a sale means another payment to the finance company – which shaves an equal sum off the potential profit the dealer stands to make on each sale.

Which dealers assumed they’d be making, pre-Corona.

They stocked up on cars back in January and February they assumed would be sold in March and April – which was seen (back in January and February) as the smart thing to do because unemployment was at a record low and people with jobs tend to buy new cars.

Gotta have inventory!

And then came Corona. A devastating upper cut, followed by a killer right that no one saw coming (except, perhaps, those who engineered the plandemic, but that’s another rant).

Now it’s early summer and dealerships all over the country are overflowing with hundreds of thousands of unsold cars they have to move in order to stay afloat – and not just to clear accumulating the debt.

These cars – new cars – have a limited shelf life, just like a supermarket avocado. A 2020 is worth less and less as 2020 rolls along. The 2021 model year is already upon us. The ’21s are the new cars now. And that means the 2020s are beginning to show signs of over-ripeness. By late summer – not far off now – the remaining inventory of 2020s will have to be fire-sold to get rid of them before fall and absolutely before the 2020 calendar year ends and the 2020s become last year’s leftovers, heavily discounted (to make space on the lot for the arriving 2021s).

Several manufacturers know the tsunami is coming and – to assure they have a place to offload the 2021s some of them are already making – are doing what they can to help their dealer networks clear their Corona’d inventory by offering free (zero percent) financing and no-payments-for-months deals.

Essentially, a free car for the duration of the deal. Which is going to prove to be a catastrophic deal for the manufacturers offering them out of suicidal desperation. Which is precisely what is going to happen.

Which will be a reboot of what happened previously. Mitsubishi moved a lot of inventory in the early 2000s, when it “sold” them for no money down, no interest or payments for a year. Problem is, there’s no cashflow there – and what tends to happen when such deals are offered is that people take them . . . and then give back the cars when the deal expires.

Mitsubishi almost slept with the fishes over that one.

This time, it is likely several other brands will sleep with the fishes. Nissan was green around the gills before Corona. Ford and GM seemed wobbly, too. Gather ye rosebuds – and ye cheap deals – while ye can.

There may be even better deals available on used cars. Or rather, on repossessed cars. There will be millions of these flooding the market in the near future because of the 33 million and counting people who’ve lost their jobs and with them, the ability to continue making car payments.

Try to imagine the mile-high wave of debt represented by all those financed cars; the outstanding loan balances that are going to have to be written off or written down, massively.

Each new car repo’d represents a loan – and monthly payment – predicated on a new car transaction price. The repo’d car is a depreciated used car. Ordinarily, this deficit might be made up for by higher interest (and thus, higher payments) on the used car loan. But 33 million unemployed people can’t afford that, either. Besides which, the sheer number of defaults and repos will be haltingly huge – a glut of cars that the system cannot absorb, even in good times.

But in catastrophic times?

There is, however, an upside to this catastrophe. If you are lucky enough to have money. Not debt – which afflicts most Americans. Money. The ability to stroke a check or put a stack of bills on the table.

If you are one such, you will enjoy leverage of a magnitude unprecedented in the history of the American car business. Your ability to buy will make you king. Rather, autocrat. A czar – and not the Nicholas II variety. Think Peter the Great.

You will be in the driver’s seat – and able to write your own ticket.

. . .

Got a question about cars, Libertarian politics – or anything else? Click on the “ask Eric” link and send ’em in!

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19 COMMENTS

  1. Semi-OT, not necessarily a “classic” but used: I’m trying to buy a 2015 Mitsubishi Lancer GT (yes, it will involve signing the next 5-7 years of my life away, if I can even get a loan), and I’m in love with the chassis, but the engine seems to be making a spark-knock noise under heavy throttle that seems to be audible only to me. Four salespeople, a technician, and my mother (who I brought along as a second set of ears) all swear they can’t hear anything, but I can hear it clear as day every time I floor it. However, with the hood up, the sound becomes inaudible; the engine note and throttle valve air-sucking are both heard loud and clear, but the pinging becomes absent. Any ideas what this means?

    • Hi Chuck,

      One way to establish whether what you’re hearing is normal would be to drive another Lancer and see whether the sound is the same. If you can’t find another to compare with, a check of ignition timing/knock sensors would probably ease your mind. Probably all is well as the car is barely five years old. But, you never know. I’d want to know for sure before I signed up for the loan.

  2. In my humble opinion, the new car market was about to implode any way, along with the rest of the credit dependent products. We were at the end of the everything debt bubble, and the consumer in general had already hit their credit limit. Which could be why the plague “appeared”. Notice how the stock market just keeps rolling along with no economy to support it. Curious.

    • Hi JWK,

      I think the stock market is doing well because big corporations are doing well. Consider the Big Box stores, which have taken away most of the business that used to go to small shops, now closed Because Corona. They are herding us into a pen where we will have the “choice” of Feed Corn A or Feed Corn B.

  3. I’ve about paid off my auto loan and there will not be another auto purchase for a while. The extra cash will either be saved or used to purchase bullion coins. As my autos depreciate, my county of residence can E’f off when they get less and less extortion from me twice a year! I would advise everyone to save and invest in as many tangable assets as possible. The greenbacks in our wallets will dramatically shrink in value due to over printing of “monopoly” money and gov’t fiscal insanity.

    • I wanted to purchase some silver bullion 2 days ago. Online store I’ve used in the past was sold out of everything but the expensive collector coins.

  4. As Eric has written about the new old cars are probably the best of everything From small volume manufacturers. Ungodly expensive but if you have the coin probably a ton of fun. i have had a few old cars in my life and its their build quality that makes me a bit reluctant to drive them consistently. Also loose steering and usually crappy brakes and lots of rattles.

    All asset markets are going to see enormous distortions now. Interesting to see where it leads. Take McCafees advice and invest in a few guns.

    • You had better buy a healthy number of guns, and an immense amount of bullets. You will not be able to get either before too much longer. And then you will be able to trade your guns for classic cars!! Not even at gunpoint, just an even trade, because they will become so valuable. Please look up “A pale horse….” at google on the author’s thoughts about where we are going and how it is being engineered by the InterAgency. Get ready, it will be a very bumpy ride….

      • Hi Saxons,

        Yup; it’s all so sad – because so contrived. A natural disaster, an inevitable war… these are terrible but more psychologically manageable things. But witnessing the world come apart by design is something a normal human mind has trouble dealing with.

  5. I tried to buy a 2019 F250 super duty platinum crew cab on the last day of April- tried to steal it actually. No luck. My local dealer isn’t hungry yet. I’ll try again May 30th.

    I’m guessing cars people buy that cost 90k aren’t on sale just yet. I’m sniffing around at the Mercedes dealer too. Still no steals on the S55s. Bummer.

  6. Just as an exercise in imagination, how far back would one have to go for a skilled blacksmith to be able to fabricate most parts needed for a car? I recall that Henry Ford used to boast that the small tool kit he included with his early cars contained everything an owner would need to repair his vehicle, and judging from my early Ford tractors he was mostly right on.

    50’s? 40’s? 30’s? Seems like an interesting thought experiment.

  7. What’s the deal about car dealers not being open ???

    Couple weeks ago we bought a newer used pickup from the big Chevy dealer and they were not only open but busy as heck.

  8. Until there’s an open venue where we can BUY a car, the abundance of good deals doesn’t do potential buyers any good! Even if someone can write a check for a car, who are they going to GIVE it to if all the dealers are closed?

    As for repo cars, I don’t know if I’d want to buy one. If the previous owner couldn’t make the payments, then the odds are good that they couldn’t keep up with the maintenance, either.

  9. Many that own classics will likely be able to weather out the Corona bs. (Jay Leno) Some that bought with debt may be forced to sell. This all assumes there isn’t more lockdowns which I believe the chances are better than 50/50 there will be. If so then we are all toast. Celente of the Trends Journal indicates the classic prices will fall in the coming deflation.

  10. That all sounds great, but the problem is, I wouldn’t touch a new 2020 vehicle with a 10 foot pole. Too much tech. Too many safety assists. Too much big brother monitoring. Too much touchscreen control. Not enough pushbuttons. Too many complex, interconnected modules on vehicles. There might be a couple of interesting vehicles out there, but I am not into turbocharged, direct injected small displacement crap. I suspect not many others are either. That’s another reason they are sitting on the lots.

    As far as used ones go, you have to go back to when cars actually had keys, not pushbuttons for me to be interested.

    I guess if I could pick up a 2020 for about $5k maybe. But of course, I would rather put 5k in my older vehicles and keep them running.

  11. I bought my first classic car in 1967, I was 19, the car was a 1960 Porsche 356 coupe. OK, maybe a seven year old car can’t be considered a classic, but it was to me.

    Over the years, I’ve been in and out of classics, yet routinely kept an eye on the marketplace.

    And such, I contend that the prices of classic cars are in direct correlation with the DOW index.

    Give it some thought, what is your opinion?

    • I don’t see much of a connection between the DJIA and the classic car market, although if people start selling their classics off, it may show up a little. It seems as if the big legs up in the car market occur when the market actually drops. For investors, the money moves around between asset classes.

      For many buyers, it may be different, I don’t know.

      I have always liked to look at the classics, but I never liked the way they drove, handled. By the time the mid 1970s came around, at least some cars could stay between the lines, but before that, cars were tricky, so I never saw their appeal beyond aesthetics and purported engine size.

      It would be fun to have a classic, but I would have to put sway bars, an overdrive transmission and beefier shocks to pilot an American boat around. I guess that’s why European cars caught hold. My dad had a 1967 Jaguar 420 sedan back in the day. t would easily out handle anything on the block.

    • The central bank is buying stocks… and about everything else (lol) since the Bond Market is toast in order to inflate more dollars into circulation. They will inflate so much that even in the coming deflation, prices will rise due to the massive dollar debasement.

      The economic suicide due to the stupidity of corrupt politicians cannot be equated with the Great Depression. Today’s lunacy from people and government alike will astound historians for centuries.
      So yes, My opinion,,, is the trend of classic prices will follow stocks, of course with some deviations on the way up.

    • “I contend that the prices of classic cars are in direct correlation with the DOW index.”

      Yes. And to broaden your statement, classic cars tend to move with asset bubbles of all kinds. The period which sadly ended in Feb 2020 has been called the Everything Bubble, as it featured record prices not only in stocks, but also bonds, real estate, and collectibles, including fine art and classic vehicles. (Some of us would say that classic vehicles are a subset of fine art.)

      But now the facade is cracking. How do we know? A notorious price-fixing cartel, the Association of Art Museum Directors, has given its members permission to sell works from their permanent collections as their cash flow evaporates. The WaPo describes how the AAMD’s Museum Mob enforcers operated:

      “Museums that dare to ignore its guidelines are censured, sanctioned and publicly shamed. For a renegade — or perhaps simply desperate — museum director, a decision to sell works from the collection, even if it’s to raise money deemed necessary for survival, might mean career death.”

      As far as we know (and I’d be happy to have my ignorance corrected if this is wrong), no AAMD-like entity restricts the sale of classic cars. The Pebble Beach Concours motors on, without sellers casting fearful sidewise glances as cowed museum directors do.

      Nevertheless, if the collapse of the sordid AAMD cartel sends the prices of overpriced “art” like Jeff Koons’ ridiculous balloon dogs plunging to earth, classic car prices could easily follow. In fact, the same people who have costly sculpture and paintings on display in their high-ceilinged home galleries often have classic vehicles housed in their capacious climate-controlled garages.

      Nice collections you’ve got there, Mr Warbucks … be a shame if something were to happen to ’em.

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