Cars are a poor store of wealth but that hasn’t stopped Kiwis spending $30b on them. By Rob Stock.
Ian Hope may own more cars than any other person in the country. That’d be quite a boast in one of the world’s most car-mad nations, but even if other collectors beat him on the number, they would struggle to compete with Hope’s commitment to staying in the company of his collection.
After Hope has shuffled off his mortal ignition coil, and is cremated, his ashes will be brought back to his Hawke’s Bay British Car Museum, which doubles as his home, to reside with his collection of 471 cars.
‘‘I’ve got my own hearse here ready with a casket on board ready to take me to the crematorium,’’ Hope says. ‘‘It will bring my ashes back to be kept in the museum.’’
Hope is a paragon of car enthusiasm in a country that ranks in the top 10 on per capita car-ownership in the world (top five if you exclude tiny tax havens and millionaire principalities).
Just how much money is tied up in our cars is not tracked in the Reserve Bank household balance sheet data, though Turners Auctions has made an estimate based on Ministry of Transport ownership figures, and came up with just shy of $30 billion.
But selling is the last thing on Hope’s mind.
The skilled mechanic, now aged 76, is planning on giving the lot away.
A trust has been set up to secure the museum’s future, and own his cars, with the exception of 20 Morris Minors, which he bought to give to his 20 greatnieces and nephews.
Our $30b car wealth compares to households’ $42b in KiwiSaver, and $100b in other investment funds, non-KiwiSaver super schemes and life insurance funds.
Reserve Bank data also shows households have about $164b in term deposits, and $492b in directly held shares in companies (including both those listed on stock exchanges and those privately owned by a small number of people).
At the end of March, households also had around $771b in housing and land, though prices in Auckland have since dipped.
That’s wealth of around $286,583 per capita – excluding equity in cars – once the debt owed on home loans, personal loans, and business loans is deducted, though wealth is unevenly spread.
Car wealth is not something that gets officially counted by the AA, or the Ministry of Transport, but Turners Auctions, which sells more second-hand cars than anyone else, has done a rough estimate using sales prices achieved at auction and in private sales. Turners calculates that we have $29.7b of car wealth tied up in some 3.6 million vehicles.
‘‘There’s art and science involved in getting to this number, and no way of checking how close we are,’’ says Sean Wiggans from Turners.
‘‘Our best educated guess would be the average value of cars is around $8200, and that the median would be more like $5000,’’ Wiggans says.
The median is the value of the exact middle-priced car in the national fleet.
The average includes the mass of old dungas, and the smaller number of highly-priced new cars, classic cars, and super cars.
It’s that low because the average age of cars on the road is just over 14 years.
Our high per capita ownership of cars is thought to be a result of a relatively small number of people living in a relatively large country, with geographically large cities, and historically poor public transport.
‘‘A car is a necessity. If you don’t have a car, then it really is hard to get around,’’ says Wiggans.
‘‘A car is a necessity. If you don’t have a car, then it really is hard to get around.’’ Sean Wiggans from Turners
National laws also make it easy to keep older cars on the road, he says.
As a store of wealth, cars are uniquely poor.
The value of most cars depreciates, and depreciation in New Zealand is especially rapid for buyers of new cars as there is a continual flood of second-hand imports arriving on our shores each year.
It costs a lot to keep cars on the road, and tanked up with fuel.
‘‘We know when people come to our auctions looking for a $5000 car, it is because $5000 is all they can afford,’’ says Wiggins.
‘‘If they could afford a $10,000 car, that’s what they would be looking for.’’
Well, not everyone. Turners’ research shows there are some subsets of the population turning away from cars.
Around 32 per cent of people old enough to drive, but under the age of 24, are looking to get a car, except in Auckland, where it has fallen below 20 per cent, Wiggins says.
On the opposite end of the purchasing spectrum are the new car buyers.
David Crawford, chief executive of the Motor Industry Association, which represents new car dealers, says the value of new and used vehicles arriving on these shores is second only to oil on the import league table.
Around 65 per cent of new cars are bought by companies, he says, and sales are buoyed by the booming construction, tourism and delivery industries.
The rest are ordinary mumand dad buyers.
Some are new immigrants. Some are wealthier people who drive new cars, and trade them in every few years, or are tempted by low finance rates.
The real price of new cars, on which the specs improve each year, are down, he says, and warranties promise years of motoring with no fear of a mechanic’s bill.
Others trade down from a larger family car when the children leave home, and buy a new, smaller car for the same price their older, larger machine cost them, Crawford says.
And some, says Wiggans, buy a new vehicle when they come into money, perhaps at retirement, because just once in their lives, they want to own a new car.
New Zealand has one of the world’s highest rates of car ownership.
Ian Hope, who runs the British Car Museum near Napier, owns 471 vehicles, including this Rover 75.