Classic Cars Prices vs Exchange Rate Impacts at Auctions

It has been almost three years since the referendum was held to decide whether Great Britain would break away from Europe, and the term ‘Brexit’ has firmly established itself since the vote on 23 July, 2016. Since then, a period of economic uncertainty followed – but that’s not the focus of this article. Instead, we are looking at the price development of classic cars at auctions since then, alongside changes in the value of the pound.

Exchange Rate: Pound Against the Euro

To begin with, let’s look at the exchange rate of the pound against the euro and the dollar (refer to the graph). Taking the monthly exchange rate from the year 2010, we see that the euro slowly became worth less compared to the pound.

From the announcement of the referendum in mid-2015, the value of the euro then rose against the pound and this continued until October 2016. Thereafter, the value of the euro fell to March 2017. From March to August 2017, the pound lost value again.

For more than a year now, starting in September 2017, the exchange rate is at more or less the same level. The euro has not been worth much on average since 2010 and the pound has fallen by around 20 percent since mid-2015.

For special cars, the objection to the steering wheel on the ‘wrong’ side is less. It is for example a lesser problem to buy a Bentley 4.5-Litre or a classic Ferrari with the steering wheel on the ‘wrong’ side. These cars have more of an international price tag, whereby the LHD or RHD has less of an influence on the cost of such a car. However, a change in the value of currencies can have an impact on the price of such a car in its own market.

Many classic cars are sold in Britain by traders and auction houses, with an even larger number traded abroad. Just think of sales in the United States, in January (Scottsdale), March (Amelia Island) and August (Pebble Beach) or those in Europe, such as recently at Retromobile in Paris. Precisely because so many cars are sold at auctions outside the United Kingdom and higher or lower prices are realised there, it is interesting to look at the price development of cars in the different currencies.

Expressed in dollars or euros, a different picture of the price development of a car can be seen than expressed in pounds. To show this, the price development of six cars is shown in the bar graphs. The graphs are looking at data starting from 2010. As always, they show the highest auction results that were realised in a year. In the last five years, the vast majority of them have been reached in the United States, followed by France and Italy. Often the highest auction results were achieved in August in the United States.

In dollars and euros the prices of these cars decreased at auctions starting from 2014/2015.

In 2018, the results of five of the six cars increased some what again at auctions. The trend that emerges from these examples is that the fluctuations in the price development of these cars in dollars and euros were larger than in pounds.

The fall in prices, particularly in dollars, was compensated in 2015 and 2016 in the UK by the fall in the value of the pound. In pounds these cars held their value better.

During 2017, the pound rebounded against the dollar (in a shorter period of time also against the euro). Small price declines of cars in 2017 in dollars, then lead to small price increases in pounds. The increase in value at auctions in dollars in 2018 was again compensated in this year by the fall in the value of the pound. As a result, the value of cars rose in pounds less than in dollars or euros.

The Ferrari F40 of which all the last highest auction results were achieved in the United States, shows this most clearly. This also applies to the Porsche 911 Carrera 2.7 Lightweight, of which the last highest auction results were achieved in dollars and euros.

The bar graph of the Aston Martin DB5 differs from the others. It should be noted that in 2016 and 2018 a RHD was auctioned as the highest. The value of this car is influenced strongly by this factor.

Conclusion

Due to the decline in the value of the pound against the dollar and euro in the past five years, many products are more expensive to buy abroad. But it was not a steady drop in value, the exchange rate of the pound fluctuated against the dollar and the euro. Not only did the currency fluctuate, so did the prices of cars at auctions. Due to the fall in the exchange rate of the pound, the fall in prices of cars in pounds was somewhat muted. As a result, the prices of cars at auctions expressed in pounds were more stable than in dollars or euros. Expressed in pounds, the value of cars were more solid.

The situation is now different from the past four years, when the prices at the auctions were under pressure. In the event that the exchange rate of the pound will weaken further this year, this will have major consequences in relation to the market for classic cars in the UK because when prices at the foreign auctions remain at the same level, the prices will rise in pounds. Then when the prices at these auctions somewhat recover, they will rise further in pounds.