Classic cars are timeless, which might explain why the classics market is known for its stability. However, the dual impact of the pandemic, followed closely by the cost-of-living crisis, is inevitably causing changes in owners’ buying and selling habits.
At ERS, our underwriters pride themselves on their ability to stay close to the classic car market and adapt to changing conditions to support our brokers business needs. We spoke to Steve Simpson and Mark Garrett to learn more about enthusiasts’ preferences and where they think the market is headed next…
Let’s start by looking at classic car sales. What sort of trends have you seen in recent months?
Steve: The good news is that classic car sales have increased this year, since the Covid drop-off – although maybe not as much as expected due to the Cost-of-Living crisis. We’ve seen evidence that increased working from home has boosted the market, with multi-vehicle households exchanging one of their everyday cars in favour of hobbyist vehicles such as classics or motorhomes.
Mark: More broadly, the average age of our clients has dropped by a couple of years – from 58 to 56 – so it’s clear that younger people are getting interested in classics. A lot of this is being driven by social media. Driving a classic car is an excellent way to display your authenticity and originality, given that many modern vehicles look the same.
What do you think will happen to the Classic market through the aforementioned cost of living crisis?
Steve: There’s a lot of uncertainty over what happens next. With economic conditions worsening, we’d expect some enthusiasts to sell-up in the coming months, while new purchases may be something only the highest earners can afford.
Mark: Post-Covid, we’d have expected real buoyancy in the classic car market. But because we’ve gone straight into another crisis, drivers are understandably being very cautious about making purchases.
Given that interest rates are rising, what’s the situation facing classic car investors?
Steve: There’s been some strengthening at the top end of classic car values, although the rate of inflation on the highest values has cooled off. The question for investors is whether they think investing in classics will ‘beat the market’ as interest rates go up. We have seen that the Gran Tourismo, 18 iconic supercar collection is up for sale, which may be an indicator of what's in the investors’ minds – do they think the values have hit their peaks?
Mark: It very much depends on the vehicle. We’re seeing some of the more affordable older cars like MGs holding their value, but little beyond this. New generations tend to invest in the cars of their youth, which is why there’s been so much interest in hot hatchbacks from the 1980s and ‘90s.
Including Diana, Princess of Wales’ Ford Escort?
Steve: Exactly. Although it was still remarkable that a Ford Escort RS Turbo – albeit a one-of-a-kind edition – would fetch such a staggering sum of £650,000 at auction. So perhaps it’s a better illustration of the fact that the top end of the market continues to inflate.
Has there been a shift back to physical viewings since society reopened?
Steve: At the top end, many transactions are now purely online. It’s a global industry, and the buyers are not price sensitive. However, those classic enthusiasts making one-off purchases will still want to see the vehicles in person.
Mark: It’s also been great to see the return of classic car events this year. For two years, enthusiasts have had nowhere to show off their vehicles. The reopening of community events and the club scene has helped stimulate demand.
Are these clubs appealing to younger classic car owners?
Mark: They’re trying, but it’s the same challenge they’ve faced for years. If your club is very specific to a manufacturer – especially one that has ceased to exist like Austin or Alvis – it’s tough to engage younger people. Sadly, younger enthusiasts are generally attracted to sportier vehicles than the Austin 7!
How have enthusiasts responded to the Government’s plan to restrict engine system modifications?
Steve: The classic car community has historically done a good job of keeping the Government honest. For example, the tax and MOT exemptions for 40+-year-old vehicles came largely from enthusiast-led pressure groups feeding into consultations. The same thing is happening in response to last year’s proposals to restrict modifications. Enthusiasts have rightly pointed out that trying to outlaw modifications on these old classics isn’t sensible or safe. The original draft had a broad definition of vehicle tampering; fortunately, we’re hearing noises that this will now be relaxed following the consultation, as almost 8,000 people responded. Transport Minister Trudy Harrison MP shared that instead, it will be focused on the tampering of advanced and autonomous systems, as well as modifications that increase emissions.
Mark: I think common sense will prevail here. There’s a vast difference between somebody trying to reprogram their modern electric vehicle, and a mechanically minded person tinkering with their older classic when an original part is no longer available.
Steve: And, of course, another example is as ultra-low emissions zones start to come into force around the UK, we’re hopeful that the government will consider the amount that an older classic is driven versus a modern vehicle. We expect that the cost of driving a modern classics will skyrocket, whereas vehicles of 40+ years (with a ‘historic’ vehicle tax class) are likely to be exempt.
Will this be the point at which we see more classics being converted to electric?
Mark: As we get more EVs on the road, there may come a tipping point in the classics market, but today electric classics account for less than 1% of our book. It’s still a contentious debate amongst enthusiasts – whether you should put an electric engine in a classic and change it away from its original state.
Steve: The environmental case for EVs only makes sense if the vehicle is being driven regularly. And the enthusiast community will always tend to push back against too much EV conversion because it ruins the history and fundamental appeal of the vehicle. It’s like steam engines – an electric steam engine isn’t a thing!
Looking ahead, what does the economic uncertainty mean for classic car brokers, and how can ERS best support them?
Mark: Many classic car brokers saw lower quote volumes during the pandemic, while renewals also went down as owners opted to lay-up their vehicles. Ironically, as demand has returned, some brokers have found themselves with staff shortages, having been forced to let people go over the past few years. It’s challenging for them to plan ahead right now.
Steve: No one knows what will happen next in the market, but our goal is always to make it as easy as possible to trade with us. If you’re a busy broker who needs to secure every last bit of new business, the last thing you want is for insurers to be difficult to deal with or slow to respond.
Mark: We’ll soon be launching our Enthusiast product on ERS eTrade in early 2023– which means brokers can instantly access real-time quote information online for straightforward risks. We’ve been encouraged by the take-up of our Motorhome product. Since going live earlier in the year, 82% of these quotes are now traded via ERS eTrade.
Steve: The key message for brokers is that we have a very wide risk appetite and incredibly flexible underwriting to match it. The classic car market is always changing, but thanks to having over 75years’ trading experience in this industry, we’ve become very good at adapting.
Finally, if profitability wasn’t an issue, which vehicle would you love to have on ERS’s books?
Steve: For me, it would be the first supercar ever, the Lamborghini Miura. Unfortunately, they have a dangerous habit of catching fire, making them very expensive to insure.
Mark: I’m also going for another Lamborghini. The shape of the Lamborghini Countach is something special, if you can afford the hefty premiums needed to get it on the road.
