Will the 2022 Monterey auctions set a record?
Monterey Car Week auctions are a week away, and they are coming at a particularly interesting time for both the economy at large and the collector car market in particular. That makes the job of forecasting these auctions quite difficult. Yet it happens to be my job, as manager of valuation analytics for Hagerty. Let me take you through the variables before we get to my prediction.
Bidding has cooled slightly … but remains aggressive for the most expensive vehicles
Our market rating had posted 15 straight months of increases through June—but it just dipped. Further, aggressive bidding, measured by bids above the Hagerty Price Guide Condition #1 (Concours) value at online auctions, is becoming less common. However, this is all relative to the fevered pitch of the past 18 months. Bidding on the whole remains aggressive: In July, nearly a quarter of cars offered at online auctions that crossed the $100K threshold went on to exceed their Condition #1 prices in the Hagerty Price Guide. For comparison, that only happened 3 percent of the time for cars that hammered below $100K.
Monterey will see a lot of big cars ...
Monterey always draws fine machinery. In recent years, though, some of the very best cars have stayed home, with sellers of top-tier cars preferring to test the waters privately, through high-end dealers and brokers, rather than risk getting low-balled in public. Strong prices across the board in 2022 and a new all-time record for a most expensive car at $142 million seems to have changed that calculation. While the auction run lists are not yet final, the number of $1 million and up vehicles consigned to the auctions is set to exceed anything we've seen in prior years.
... In some cases, perhaps too many (or maybe just right)
There are twelve Mercedes-Benz 500K/540Ks at the auctions. That's six times the number we'd expect to see at auction in a typical year. On the one hand, this represents a once-in-a-lifetime opportunity that could attract more buyers—everyone who has ever dreamed of owning one of these special cars and has the means to buy one is likely to be here. On the other hand, there are only so many of those people. If supply exceeds demand, some of the cars, particularly those later in the week, could suffer.
That said, we're not concerned about there being too many cars or too many auctions overall, as was the case back in 2019. Two auction companies have stayed home this year, while a new auction, from Broad Arrow Group* will offer cars at Monterey Jet Center on Thursday. We expect just under 1200 vehicles at the auctions, which is less than the 1300 to 1400 we've seen consigned in past years.
Will Monterey reap 2022's appreciation?
The story through most of 2021 and 2022 has been across-the-board appreciation. Since we gathered in Monterey last August, the average Hagerty Price Guide value for a car in #2 (Excellent) condition has increased 8.9 percent. Increasing 2021's average price $433,587 by that same 8.9 percent gets us within $2K of our average price forecast for 2022. (Note: This is not how we calculate average price, but the fact that two independent calculations churn out similar results tells us they're more likely to be accurate.)
Are sellers coming in with realistic expectations?
At the day, what we think a car should go for isn't as important as the number a seller has in mind. At auctions that have finalized their run lists, the share of vehicles with reserves is 58 percent, which is higher than all other recent years except for 2015 with 63 percent. If enough of these sellers have expectations that aren't realized, we could see a lot of no sales.
That said, when we compared low estimates for lots to condition-appropriate Hagerty Price Guide values we found the former to be only slightly higher—a median of two percent. Not excessive, in other words.
Will total sales be a record?
We can envision three scenarios:
- Everything "clicks." The quality and quantity of million-dollar consignments attracts exuberant bidding. Total sales approach to $500 million. That would beat the prior record for Monterey by $100 million.
- There's widespread disagreement about values between sellers looking for top dollar and bidders who think that top has come and gone. A few big "misses" could significantly affect the total. In this scenario, total sales could tick down by more than a third compared to last year. For those of you who remember Monterey 2019, this would be something of a replay.
- Something in between the first two: Bidders find the quality of the cars compelling, and consignors haven’t gotten carried away with reserve prices. In this case, sales would edge past 2015—the last market peak—but only slightly.
Our forecast, $395.8M assumes the third scenario is most likely.
One parting thought: In any of these scenarios, but particularly numbers 1 or 2, there will be a lot of prognostication on what the results mean for the market as a whole. We should be wary of that. No doubt, a strong result will add fuel to the hot market, and a weak one will cool it. But if we've learned anything during the pandemic, it's that the collector car market is much, much bigger than any single event.
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*Hagerty has entered into a definitive agreement to acquire Broad Arrow Group. You can read more about it here.