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Car Collecting and Car Buying Diverge in 2023

Last weekend was the Naples Car Show, formerly known as “Ferraris on Fifth”, where collectors bring their McLarens, Lamborghinis, Aston Martens, Bugatti’s, Paganis, Ferraris, Bentleys, Rolls Royce’s, and Maserati’s out of storage for a charity event that raises more than $1.0 million for a local alcohol and drug rehabilitation home. As I have mentioned in the past, the proliferation of Porsches makes them as common as Tesla’s but this year the most common car was a Ferrari. I counted more than 250 makes and models.

I thought this was going to be my year to enter my English racing green, 4-cylinder, turbo Mini Cooper as the “last car standing” after hurricane Ian’s storm surge destroyed so many vintage collections.  No such luck – the resiliency of the Naples collector market is darn impressive – there were more than 750 cars on display.

Here a few pictures of the vintage cars on display. My favorites, the Shelby Mustang and the GTO both of which were my obsession in high school, but slightly unaffordable for a “Plain Dealer” paperboy were not in attendance.

Talking with these collectors you get the distinct impression that prices of vintage cars are going up faster than new condo projects in Southwest Florida. Ian helped with the scarcity part of the equation but the proliferation of wealth in Naples Florida is the real driver.

Real World Auto Markets Are Much Different

Within my auto buying experience I have never seen a whiplash like the one an auto consumer has experienced in the last 3 months. 2022 was the year of the trade-in where many used cars were worth almost as much as their original purchase prices. Also interest rates still hovered around 3%. If you could find a new car, you could trade in your jalopy and finance the paltry remainder for one of the lowest APRs ever in my lifetime.

2023 Will Be A Challenge For The Auto Industry

2023 is another story altogether. The used car market frenzy is abating. Dealers have too much inventory at crazy high prices. As the new car market recovers from supply chain issues the consumer is facing inflation, interest rate increases and high energy costs. Dealers still have a lot of used cars and they don’t need your car like they did in 2022 when there was no new car availability. If you have to trade it in, you will no longer get top dollar. Here is an assessment from Auto Dealers Exchange Services of America (ADESA) as reported by CNBC in an articled by John Rosevear and Michael Wayland published on December 23, 2022 :

“According to ADESA the the average price of all vehicles wholesaled at ADESA was was $15,254 down 12.3% from a peak in May (2022) but still up 37% since 2019. In 2023 the used car price may continue to drop 10-20%”.

The financing world has also changed. For cars ordered in October and delivered in January 2023 interest was 3.5%. Now it is closer to 7%. The auto industry faces a difficult 2023 with the consumer getting less for a trade in, paying more to borrow but still paying high prices for used vehicles, if he cannot afford a new car. Forecasters are predicting only 14.1 million new car sales in 2023 compared to 13.7 million in ’22, 15.1 million in ’21 and 14.6 million in ’20.

Collectors may be doing fine but the US auto industry is posting horrible compound average growth numbers. That industry has experienced every speed bump imaginable from Covid-19, to rising gas prices, rising interest rates and high priced inventories of used vehicles. This is one industry that has been experiencing a recession for 4 years.

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Rob McCreary

Rob McCreary has more than 40 years of transactional experience as an attorney, investment banker and private equity fund manager, and has spent his career in building entrepreneurial organizations with successful track records. Founder and chairman of CW Industrial Partners (originally CapitalWorks, LLC), he is responsible for developing and maintaining senior relationships with investors and portfolio governance.

This blog represents the views of Rob McCreary and do not reflect those of CW Industrial Partners or its employees. This blog is not intended as investment advice. Any discussion of a specific security is for illustrative purposes only and should not be relied upon as indicative of such security’s current or future value. Readers should consult with their own financial advisors before making an investment decision.