And it's not 'Covid tax'!
YOU CAN’T look at a social media car advert right now without seeing the words ‘Covid tax’ in the responses and feedback.
But is Covid tax the only reason for the recent price hikes in the cars we love, and what is Covid tax anyway?
It’s no secret that the asking prices of classic cars – Aussie stuff in particular – have headed for the moon in the second half of 2020.
The theory seems to be that the hikes (the Covid tax) are down to JobKeeper payments suddenly seeing low-income earners with more money in their pockets than ever before, and a group of workers who took government-backed opportunity to raid their superannuation also finding themselves in the same cashed-up boat.
Maybe it won’t last long, but that’s one theory.
Throw in the death of Australian car-manufacturing, historically low interest rates and a Covid 19-magnified wave of nostalgia for the good old days, and you have yourself the perfect storm for asking prices to go ballistic.
But is that what’s really happening?
Car Sales Manager at Melbourne’s Healey Factory, Russell Cox, doesn’t think so.
He does, however, recognise that prices are heading north at a great rate.
“People are going crazy at the moment,” he says.
“But it’s not on everything. High quality cars at under $50,000 are where the action is, but those are still high-end cars, so they’re not what anybody on JobKeeper is looking at.”
So what is jacking up prices?
“My theory is that people are not travelling. They’re not spending their usual 20 or 30-grand on overseas holidays. We had a customer in here recently who normally visits his house in France at this time of year, and this year, he’s not. So he bought himself an Austin Healey instead.
“Beyond that, it’s supply and demand. And the supply’s just not there. During lockdown, people from outside Melbourne couldn’t even bring their cars to us to be sold, and I’ve been having to buy cars sight unseen to get stock. And sometimes you get burned doing that.”
But Russell admits that none of this explains the stratospheric rise in the prices of Australian cars, many of which are of dubious condition.
“Three-on-the-column, six-cylinder Kingswoods and Falcons and the prices being asked for them…I just don’t get it.”
Clive Massel of Makulu Vehicle Services offers other reasons for the phenomenon.
“There are three primary reasons for the increase in interest in the classic car market,” he told us.
“The first is that investing in a classic car is capital-gains free. Secondly, there’s a better return than bank interest rates at the moment. And thirdly, many people just don’t know what lies ahead or what life will be like in a Covid world. Some are saying, stuff it, we’re going to buy what we want and enjoy it.”
There are, of course, problems associated with the boom, says Clive.
“I’m concerned that some buyers are naïve. They end up buying the wrong cars because they don’t know what they’re looking at; they’re not enthusiasts.
“The danger there is that the car won’t live up to their expectations and that’s the moment classic cars won’t be the flavour of the month any more.”
The other question is whether prices will stay this way or if there will be a correction that will see them fall.
Russell Cox believes there will be an end to the insanity, although, on the basis of his bottom line, “We’re hoping it’ll continue”.
Clive Massel agrees: “This is great for business right now, but eventually there has to be a correction. I can’t see prices going on and on like this.”
But even if some prices do soften, those for cars that were undervalued when the hike hit should stay buoyant.
So don’t throw your crystal-ball in the skip just yet.
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