Valuations – A Different Perspective
Have you ever noticed that sometimes you keep seeing the same subject raised and you begin to ask yourself if you should be taking note? For me in the last few weeks the ongoing subject of values of cars has been raised by several colleagues /associates /clients. They are people who have had a huge amount of experience and knowledge with classic cars. I won’t mention names but I can give an indication of the sector they are from and operate within. They have some interesting perspectives.
MG Mad He has been operating in the MG world for 35+ years and knows the marque exceptionally well. We were discussing his fleet of vehicles and their insurance requirements. On some of the cars he is very specific in regard to the values and on others he is not particularly bothered as he realises that some of them are ‘just old cars that are still in operating order’.
We discussed values and how they were are arrived at. Due to his knowledge and the awareness of the cars of special interest in New Zealand he felt confident in the establishment of values. However, he made an interesting comment which I wanted to share. He said that we have a perception of the car’s value but it is not actually ever realized until it is sold. So if you have a high value on your car, are not in any hurry to sell it and are prepared to wait for 12-18 months then the market will come to your price.
However if you want to sell the vehicle quickly then you are going to be subject to the laws of supply and demand. You are also sacrificed to the punter who is looking for a quick kill (picking up a very good car for a very average price). It comes down to who is in the market at the time and with cash in hand.
Then of course there is an additional proviso. There are many cars out there that are of ‘average’ standard but the owners think the cars are worth much more. It does put an interesting factor on understanding of the mechanics of settlements for insurance claims on your classic car.
Prestige MV Importer The second gentleman on my radar has been in the classic car scene for a large number of years and focuses on the higher end cars. These cars are valued in excess of $80,000 and some as high as US$1,200,000. He buys cars from the UK and sells them to the USA or to anyone who recognises the value of the car.
He is a New Zealander and he mixes in the top line of business people and classic car fraternity. He believes the New Zealand market is not mature enough to recognise value when they see it. His perception is that we are not prepared to spend the large dollars on these cars.
FROM THE SIMPLY CLASSICS INSURANCE DESK
However, in saying that, New Zealand’s market has been rather blessed in having some very unique cars here. Call them ‘Barn Finds’ if you will, but there are not many of them and you have to keep you eyes and ears open to be able to find that purchase of a life time. He considers that many of the classic cars that we have in New Zealand are over-priced and over-valued because in reality they were just your everyday consumer car of the 50s 60s, 70s and now 80s that have just been well kept. But are they truly classics? This then puts an interesting spin on the value of cars and is it fair?
The environment of the classic car fraternity is forever changing as many expats from the UK, Europe and USA bring their cars with them to New Zealand and put them on the road. Thus we are now seeing cars that we had never seen before and if these cars have come from Texas or California they may be 40 years old but no rust.
In the next few years we will also have the release of many cars into the market from horders who pass over and the estate wants to get rid of the cars. This raises the questions of: 1) who is going to buy them, and 2) based on the law of supply and demand how will this affect the value of your own car?
This brings me to the point of my thinking. In regard to modern vehicles, those within the insurance industry have a relatively high probability of getting the insurable value correct. However, classic cars, trucks etc are another matter.
The situation is really defined when the vehicle is about to be written off as the insurers will use their own resources to establish the market value of the vehicle. However, sometimes a huge canyon emerges between the owner’s perception of value and reality. Thus referring back to MG Mad, in the event of a total loss you don’t have 12-18 months to realise your perceived value. The decision is based on the here and now. In regards to Prestige Car Importer his perception is that you’re lucky to get anything unless it’s a true classic of the type that he deals with.
So my advice to many of the people that I talk to is to get a written valuation done on your vehicle when you purchase the car or you are about to insure it. It is just so much safer in establishing pre-accident values. It also reduces stress levels in the event of a claim as everyone is talking from the same page.
As an additional bit of info for those that read my page from time to time, I have re-calculated the statistics that we hold on the cars insured and quoted on. The mean value of a classic (and this includes both Australian and British marques ) is $12,000. The high end European vehicles like Ferraris and valuable vintage cars are about 5% (of the distribution bell curve) of the cars we have looked at to insure.