Economics of Car Valuations
The Economics of Vehicle Values
The value of an antique car or a collector vehicle is driven by three key factors: desirability, pedigree/provenance and condition. These three factors fit into an equation which eventually leads to the value of the vehicle. The weight to be assigned to any of the factors is subjectively based upon the influence any one factor has over another.
Let’s take a look at these three factors:
Desirability: Although this is a subjective measure, it is fairly easy to quantify. A desirable vehicle is one that nearly anyone would love to own. Also vehicles that were produced in limited quantities or with attributes or options not commonly found on contemporaneous models are desirable. Exotic vehicles are usually desirable on their name alone. Finally, some vehicles are desirable simply because they are cool. While every vehicle is desirable to a collector on some level (yes, even the Yugo is desirable if you can find a complete and somewhat running example), it is the level of desirability which drives the value. The more people who like the vehicle; the more desirable the vehicle is. Specific years, specific models, or specific options can make an otherwise undesirable or not so desirable vehicle desirable for the purpose of valuation. Keep in mind however, that although desirability drives just one aspect of the pricing structure it can sway the equation completely. A fitting example is a Duesenberg. In any condition, and even without any pedigree or provenance, a Duesenberg will ALWAYS command a relatively high value based purely upon its highly regarded desirability and relatively low production figures. The weight to assign to desirability can also be dependent upon the year, model, options or scarcity of a model.
Pedigree/Provenance: This is where most vehicles are lacking. Time has a way of erasing memories. By and large, information about a vehicle’s origins was not something that was discussed when the vehicles were sold, “back in the day.” Most vehicle owners do not have much information about the vehicle before they acquired it. Therefore, when you come across a vehicle with paperwork or history, dating from new, you are looking at a vehicle with pedigree. Merriam-Webster defines “pedigree” as the origin or history of something. Items that add pedigree are copies of old titles, registration paperwork, original sales forms, window stickers, build sheets, factory documentation, certification, etc.
Provenance is the history of ownership of the vehicle. Vehicles that were once owned by movie stars or other public figures tend to be worth more than other similar vehicles. These same vehicles also tend to have more options or unique features which make them more desirable (see above). Vehicles that have a known, uninterrupted chain of ownership, from new can also be said to have provenance. Nevertheless, the weight assigned to this form of provenance is obviously not the same as the weight assigned to a chain of celebrity ownership or ownership within a large nationally recognized vehicle collection or museum. For provenance to be given appropriate weight, it must be substantiated with documentation.
A vehicle with either pedigree or provenance is worth more than a similar vehicle without. A vehicle with these attributes is sometimes referred to as a “no stories” vehicle.
Condition: This third and final factor is the “make it or break it” for most vehicles. Even if a vehicle has good desirability and pedigree and/or provenance, it likely won’t influence the value of the vehicle as much as condition. A vehicle with in superb original condition (i.e. extremely well-kept since new) or a vehicle which has been restored or built/rebuilt to an extremely high level is worth more than a similar vehicle needing restoration or a similar vehicle in a deteriorated condition. In recent years we have seen a push for original vehicles. As the appreciation for these examples has risen, so has the weight assigned to originality with respect to valuation. (Note: An overwhelming public appreciation for a particular vehicle or vehicle trait tends to also weigh heavily on desirability). The more original a vehicle or the better the restoration of the vehicle, the more the vehicle is worth; period.
Although the equation into which these three areas are plugged is somewhat objective on its face, the weight assigned to any one area is subjectively based upon the knowledge, expertise, and experience of the person assigning the value.
Any attempt to confidently assign a fixed weight to any of these three areas would be illogical. There are far too many vehicles with far too many options, characteristics, stories, and degrees of condition to allow for such a rigid valuation method. Each vehicle must be evaluated first on its own merits and then against similar vehicles with known sales to find a comparable sale. Then the comparable sales must be evaluated to see how closely they match the subject vehicle. The closer the comparable sale, the closer your estimate of value will be to the actual value of the subject vehicle. You must however, keep in mind some principles of economics such as, market saturation versus scarcity, preferences, and rationality (i.e. marginal cost versus marginal benefit).
This theoretical approach to the economics of car valuation should provide you with an understanding of why one vehicle is worth so much more than another. The equation described here should be view as a template which along with the expertise of a seasoned professional will likely allow you to confidently arrive at a value for your particular automobile given the economics discussed herein.
Attorney Bryan W. Shook is a devoted automotive enthusiast, but is also an experience litigator who devotes a large portion of his law practice to helping other collectors and hobbyists understand today’s market. Attorney Bryan Shook is available throughout the United States for consultation, advice, and information. If you’d like more information about this topic or would like to speak with Attorney Bryan W. Shook please email him at BShook@shooklegal.com
Bid with Knowledge; Buy with Confidence – Vintage Automotive, LLC
