When news broke this month that a 1963 Ferrari 250 GTO sold privately for $70 million, it was a good reminder that between all of the auctions we talk so much about, there’s also a lot going on in the private market.
Is this GTO sale part of a shift away from auctions and a return to the private market? Using Hagerty’s insurance and auction data, we found that more buyers and sellers are in fact dealing privately so far this year. And while top-shelf cars have struggled to meet reserve in recent months, it seems that prospects are rosier on the private side.
By the numbers
Our data indicates that, especially at the high-end of the market, things are shifting toward private transactions. In 2015, the number of $1M-plus vehicles sold at auction continued its trend upward, while the number of such vehicles sold on the private market dropped. This difference, in favor of auctions, shrank in 2016, then grew again in 2017, and now appears to be trending back to parity in 2018.
We’ve observed that, typically, more than 30 percent of $1M-plus vehicles that are part of a collection have gone to auction every year. This share peaked in 2015 at over 46 percent, but that number (adjusted for the partial year to date) is down to 27 percent in 2018.
A much smaller share (only 2.6 percent on average) of vehicles at all price levels go to auction every year. The broader market also shifted towards auctions in 2016 and 2017 with a peak of almost 2.9 percent in 2016, but that now appears to be an anomaly as the share of vehicles sold at auction in 2018 is down to 2.4 percent. The share sold privately is also increasing in 2018.
What’s driving the shift from auctions?
As prices raced ahead in 2015, taking a car to auction ensured that it got in front of a lot of buyers and that it got in front of them quickly. With more speculators in the market in 2015, who may not have had as many genuine ties to the hobby, an auction was the best way to reach buyers.
Now that the market isn’t as red hot, cars at an auction with stories and red flags are more likely to go unsold, which hurts chances of a later (private) sale. Another possibility is that there are more and more ways to connect buyers to sellers today.
For especially high-dollar cars, auction fees can be seriously hefty, so some sellers who know there is a strong demand for their vehicle can opt to have a broker handle the transaction at a much more affordable cost. There’s also less risk if your car doesn’t meet reserve (when that applies), and you don’t have to deal with transport costs.
“Values have gone up in the last few years, so the economics make more sense for private sales in the eyes of many owners,” says Hagerty marketplace director Colin Comer. “A lot of high-end sellers are also interested in staying under the radar, which is a lot harder when you’re dealing with a public auction. Not everyone wants that kind of attention.”
RM Sotheby’s and private sales
Even RM Sotheby’s is seeing the value of cutting out the auction block, at least in some situations. The company opened its own private sales operations, which makes perfect sense for some additional revenue between big auctions. (And for the clients who value their privacy.) In short order, RM Sotheby's recently listed and sold a gorgeous LM-Spec McLaren F1 for an undisclosed sum.
"Private sales have always been a large part of our ongoing business and for some our clients it is the preferred arena for transacting," RM Sotheby's chief financial officer Jarrett Rothmeier tells Hagerty. "The formation of the official [Private Sales] division complements our auction events, and together with out financial services, provides a full, global range of collector car services to our clients. Our Private Sales division should be seen as an added value to the hobby, and we will continue to collaborate with industry leaders including dealers and brokers, in order to achieve success on behalf of our clients. Using the McLaren F1 'LM-Spec' as an example, the new division allowed us to marshal the resources of our auction platform, including our international team of specialists, in-house research team, and world-class marketing, to publicly market a car for private sale on behalf of a client who preferred not to sell at auction."
All that said, auctions are not dead in the water. According to Rothmeier, there's still a lot of value to be had under the tent. "Our auction platform provides us with the unique ability to gauge supply and demand and subsequently provides the foundation of market intelligence that many dealers and brokers simply do not have access to," he says.