Buying and selling classics in the days of COVID and beyond

By Steven Cole Smith
May 31, 2022 | Auction, Buying and Selling | Posted in Features | From the Sept. 2021 issue | Never miss an article

Photography Credit: Courtesy Mecum

It was a global crisis unlike any other in our lifetime. According to a dashboard prepared by Johns Hopkins University, at this writing there have been 33,580,588 reported cases of COVID-19 in the U.S., resulting in more than 600,000 fatalities. Globally: 179.7 million cases, 3.8 million deaths.

Stunning, since COVID-19 was unknown even to the scientific community until December of 2019, when the first case was reported. Since then–well, Google COVID-19 now and you get 5.8 billion returns. Google it two years ago and you would likely have gotten zip.

Somehow, we made our way through it, but COVID-19 changed so much in our world (Google “Zoom meeting” and you get 18.4 million hits), some things for the worse, some for the better, and some we aren’t quite sure about.

It was a disaster for the restaurant, hotel and movie theater industries. It was a boon for mask makers, pizza delivery and online racing.

And you may be surprised to learn it was, after a very chilly four or five months, ultimately a boon for classic car sales. The business came roaring back like a Lamborghini missing its mufflers, and it shows little sign of slowing.

Online auctions quickly replaced in-person sales at many houses due to state and national restrictions during the height of the pandemic. Even traditional, premium auction houses like RM Sotheby’s fully embraced online auctions in the time of coronavirus–some with fortuitous timing.

RM announced on May 10, 2019, a new series of online-only, single-lot and capsule automobile auctions. After hosting just a handful of these sales in 2019, the auction house held nearly two dozen in 2020 and another half-dozen by the end of May 2021.

Before COVID-19, a Ferrari F40 was easily a million-dollar car. Just this spring, RM Sotheby’s got $2 million for this one. Photography Credit: David S. Wallens

In February, the house held its first “transcontinental” auction, with a 76% sell-through rate and bidders from 41 countries–28% of which represented first-time RM clientele. Day one was European lots; day two was North American lots with $3,236,075 in sales; and day three was a stand-alone, Swiss, single-owner collection of seven rare Porsches.

Still, in-person events–like the recent RM Sotheby’s auction at the Amelia Island Concours d’Elegance, a single-day live auction–are returning to their robust status, with Amelia totaling $42,174,340 and a whopping 95% sell-through.

Sam Murtaugh, chief operating officer of Mecum Auctions, said, “Business for us has been up tremendously, really since we came out of the initial lockdown period. The results we have been able to achieve over the past year have been nothing short of amazing. From a sales perspective, it was a triumphant year.”

The shutdown gave Mecum time and motivation to concentrate on enhancing its online bidding platform. “We fast-tracked that project starting in April,” he said, “when we couldn’t have live events.”

And when they were able to return to in-person auctions, often under dramatic safety protocols? “What we found was the majority of customers who would come still came, and online was dominated by new customers, new bidders. We have been selling 25 to 35% of cars online, a significant increase from the year prior. It just added fuel to the sales.”

How did traditional auction houses adapt? A combination of online sales and social distancing. Photograph Courtesy Mecum

That said, Murtaugh believes it will never replace the “ability to come and touch and feel and see with your own eyes. People are a lot more confident when it’s in person.” That said, he added, “I don’t see internet bidding slowing down. It’s just an extension of the marketplace.”

Unfortunately, not every sector of the classic car community managed to profit from the coronavirus. “COVID kicked our ass,” said Bob Sellers, vice president and chief operating officer for Reliable Carriers, that auto transport company with the big orange tractor-trailers. “All the events stopped–the auctions, the manufacturers’ auto shows and presentations. Everything in our world stopped.”

Reliable normally has 400 trucks on the road, and that shrank to a small percentage of that number during the lockdown. “But we plan for a rainy day,” he said, “and I’m proud to say we rode out the storm. It wasn’t easy, but we managed.” Now Reliable is back up to 90% and growing. “If I had another 100 trucks,” Sellers told us, “I think I could keep them busy right now.”

Much of that is due to online sales, as companies that sold vehicles personally sight-unseen were in the catbird seat for the coronavirus. “Bring a Trailer just exploded,” Sellers added. “Talk about being in the right place at the right time.” BaT, as well as other online-only marketers, account for a significant percentage of business for Reliable and other transporters.

Another big post-COVID sale: Mecum brought in $1.87 million for Parnelli Jones’ Big Oly Ford Bronco. Photograph Courtesy Mecum

Sellers predicted a return to full capacity for the brick-and-mortar auctions, and he suspected some of them could embrace a new business model: If the vehicle doesn’t sell at auction, they keep it on consignment and market it online for a while, giving themselves a constant source of inventory.

As for the pandemic, said Sellers, “We kept all our employees, paid our bills and we’re still standing.” After what the world went through, that’s about all most of us can ask as we emerge from the other side, ready to regain our footing.

One of those brick-and-mortar retailers never lost that footing, though. Spencer Trenery of Fantasy Junction, located near San Francisco, said, “Despite what we might have imagined from the outset, COVID didn’t put a big dent in our bottom line from last year. We’ve sold a lot of cars.”

The internet helped with that, of course, as the Fantasy Junction showroom was closed to casual customers from March 17 to October 1, 2020. “We used a lot of FaceTime and Zoom to sell cars. People could see them through their phones up close. We’d start the engine, open and shut doors. I won’t say it’s a direct replacement for being here, but it’s a lot more efficient than flying to San Francisco from Atlanta or Amsterdam.” In some cases, buyers have hired a local enthusiast or expert to come look at the car in person and report back.

More strong sales: $758,500 for the Briggs Cunningham Le Mans Corvette (RM Sotheby’s), $3.3 million for the 427 Cobra S/C (Mecum) and $31,000 for the Saab 95 (Fantasy Junction via Bring a Trailer). Photography Credits: Courtesy Mecum (Cobra), Courtesy Fantasy Junction (Saab), Teddy Pieper Courtesy RM Sotheby’s (Corvette)

COVID actually created a market, Trenery explained, that few of us could have envisioned. “We have had a lot of clients telling us that I may not be able to go to Maui, but I can have this car in my garage in Oakland and I can work on it or reupholster the steering wheel in my own personal bubble.”

With this sizzling market, used car dealers are having a difficult time maintaining a solid inventory. Is it the same way in the collector car market?

It is, said Trenery, but not because of the same factors that are driving a used car shortage. “Everyone is having a hard time finding cars. I think it’s because the kind of stuff we sell, really great cars, the values are down, and people who don’t have to sell aren’t interested in selling.

“Someone who paid $1.1 million for a Mercedes 300SL roadster in 2011, saw it rise to $1.5 million in 2014, and now sees them going for $975,000 doesn’t want to lose money, so he’s holding on to the car. That shortage is making the price of cars that are available rise.”

It has also caused some of the premium auction houses, Trenery said, to offer vehicles that they might not have in 2014, at a market peak. “I don’t think Gooding would have been real thirsty in the past for a 23-window VW Microbus, but those kinds of vehicles are finding their way into more auctions.”

There is also a sobering aspect of COVID that has driven sales of all types of collector items, not just cars, said Mecum’s Murtaugh: You only live once.

“What we’ve witnessed is a white-hot marketplace, and not just in the collector car business, but in all areas of collectibles. One result of the pandemic is that it has caused a lot of people to think that life is short, and if you want to buy or do something, now is the time to do it, to take advantage of the time we have. It has taught us to pull the trigger on things we want. And I don’t see that lessening for some time.”

Pandemic Point of View: LBI Limited

As lockdowns commenced, we noticed a pause in the collector car market that allowed us to refocus on how we conduct business. We noticed inefficiencies about our daily operations that COVID exposed–such as the massive time spent behind the wheel of a truck and trailer, personally picking up and delivering cars–which took time away from growing the core elements of our brand.

We built LBI Limited from the ground up starting at 19 years old with no funding of any kind, so we were accustomed to that hands-on, in-person nature of our dealings and the mentality that we will outwork anyone.

That passionate drive is still there, but COVID helped us shed that inefficient, time-consuming nature of operating in person for everything and allowed us to work smarter. We have always been an online-based brand conducting almost all of our sales entirely online, but COVID forced us to think creatively about how we could improve lbilimited.com to further accommodate sight-unseen sales.

We refocused our marketing efforts with a heightened emphasis on digital content creation and partnerships as well as a Specialist Program that allows our team members to source, acquire, sell and consign vehicles remotely from anywhere in the U.S. under the LBI Limited brand.

With the exception of a few beginning months of lockdowns, the collector car market has been very strong. People, including us, realized that driving became even more therapeutic and meditative; we appreciated it even more than we did previously.

People who otherwise would have procrastinated in acquiring a collector car realized ownership would be rewarding on so many levels. Driving alone was a safe place to escape the confines of the home, and collector car ownership also doubled as a tangible investment.

Suddenly, those numbers on a screen in your investment account seem slightly less rewarding and, in a collective YOLO moment, the collector car market–especially cars $100,000 or less–went “to the moon!”

Will it have a Dogecoin-like correction and an ensuing series of peaks and troughs? Luckily, the collector car segment is much less volatile than crypto and meme stocks, but there is likely a slight correction somewhere on the horizon. For now, we will all continue to ride the rocket ship.

Adolfo Massari
LBI Limited
Founder

COVID: Sidelining the Restoration Shops, Too

Photograph Courtesy Vintage Motorcar Company

Located in the state of West Virginia, we were shuttered by Governor Jim Justice’s stay-at-home order as of 8 p.m. on March 24, 2020, until we were permitted to reopen on May 4, 2020. Almost 2000 hours of no hourly rate being charged or any progress on projects, of invoices not being generated or paid, were difficult and amounted to a substantial loss of revenue.

While we were closed, we were able to pay our employees by using a PPP grant and the monies built up in our reserves. Our financial responsibilities continued: Building payment, taxes, insurance and other expenses remained during our shutdown. During that time, we contacted all our clients to discuss their projects and comfort level with work being performed once we were able to return to normal operations.

Approximately half our clientele requested that we let their projects sit, as they were unsure of how the pandemic would affect them financially. Some clients allowed us to resume work within 30 days of our return in May, while others waited until three months after our return to allow their project(s) to come back into rotation.

Those projects that sat idle took up valuable space and led to an even more significant financial hit for us. Too many of the projects were in a state where they were unable to be moved easily to allow us to bring in other billable work.

The lack of accounts allowing work and paying invoices as well as the time between restart and invoices being paid required us to hit our resources even harder until we were uncomfortable with our bank balances.

We did, nonetheless, survive the pandemic, whereas many small businesses did not. Grateful to still be in business, we utilized our line of credit and moved forward, continuing to provide for our nine employees and operate our 20-year-old company.

Fast-forward to mid-2021, and we are still feeling the repercussions of 2020. We are slowly replacing our reserves. We are being selective in our spending on upgrading equipment in our shop or making wishlist (unnecessary) improvements to our facility.

We remain cautious about sponsorships and donations, which is a change for us as we like to give back to the community. We are spending advertising dollars more cautiously and foregoing larger sponsorships of events with which we would like to be involved.

We have delayed annual employee pay increases as we regain our financial security, and thankfully every employee has been understanding and supportive. They, too, know what the pandemic did to us as well as themselves, personally and financially. Their compassion and positivity mean the world to us. We know we have an incredible team of talent here in the Vintage Motorcar family and are grateful for them all.

John and Lori Bassler
Vintage Motorcar Company

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