The market sets the prices
If I had a quid for every time I’ve heard the phrase for
insurance purposes, I’d be a rich man now. Nobody, not even those
in the classic insurance industry, know what it means - with
the exception of those in the antiques trade who seem to think
everything should be insured for its market value, plus 30%.
Trouble is, with all the antiques roadshow programmes around,
the practice is spreading to the motor trade. It’s truly amazing
how many cars bought last month for £6,000, now miraculously seem
to be worth £8,000. If that’s the case, count me in for an Arfur
Daley car lot, complete with caravan for an office; and with lovely
30% profit margins on each old smoker, this time next year
Rodney…
But unfortunately, the reality is different. It’s true that some
of us will get mates rates when we buy a motor from a trusted
friend, but most don’t. The psychology of contented buying,
however, says that we must feel we’ve got a great bargain, which in
turn dictates we got it cheap. The reality here is different, too.
The market sets the prices and if we all got a bargain, then the
market would be wrong - and it never is.
And that’s the point; the market is a great leveller and it has
a way of finding the correct value for anything with four wheels.
Consider this: a Jaguar V12 Sovereign cost £29,000 in 1987, whilst
a Mini 1000 cost a mere £4,000. Fast forward 20 years and
both could be classed as classic cars; the difference is the market
now values them both at the same price – either can be picked up
quite easily for under three grand now, despite the fact the Jag
was seven times more expensive new.
The interesting thing about the market is that it knows the
difference between a banger and a classic and sometimes that’s not
easy to define. When is a car a banger? Is it mileage, poor
condition, lack of rarity, or something else? Repair costs can come
into the equation, which is why the Jag is now down there with the
Mini. Just one service item such as an exhaust could render
the Jag uneconomic, whereas the Mini owner would get change out of
fifty quid.
So, what about rarity value - does this make a difference in the
marketplace? It would seem not. A couple of issues ago I
recounted the tale of the 1971 Morris Marina 1.3DLwith a handful of
miles on the clock; even with the low mileage, it was only worth
around a grand, mainly due to the fact Marinas weren’t particularly
desired even when they were new.
But a Marina was a mass-produced bread and butter model. What
about a genuinely low production run car? There are two ways
of looking at this: the first is that cars such as the 1973 Porsche
911 RS 2.7 were made in very few numbers, but are assured
mega-money classic status by their sheer ability and desirability.
On the other hand, cars such as the 1974 Lotus Elite were few in
number, but that was mainly due to the public not buying
them. Consequently, with the public (and therefore the market)
having a long memory, the values are still on the floor.
Still, there are those that didn’t sell well new and were not
well regarded in their era - the Edsel, MGC and Triumph Stag being
three that stand out - but are now having a renaissance. It
would seem the true lesson of the market is: never say never!
Looking for insurance cover?
Towergate Classic Motor can help you find the right classic car insurance
cover for your motor vehicle. Call us today on 0870 990
6060 for a quote.