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A Special Monterey Car Week edition, with intel from the big-money auctions and interviews with the CEOs of Lamborghini and Bugatti. 

Robert Frank at Monterey Car Week. Credit: Crystal Lau | CNBC

Last week, I made my 13th annual trip to Monterey for the Pebble Beach Concours d’Elegance and Monterey Car week. Most people go for the cars — I go for the collectors. With hundreds of millions of dollars’ worth of cars up for auction, along with exclusive parties, rallies, races and unveilings, Car Week is far and away the biggest gathering of ultra-wealthy car collectors in the world. As one collector told me “I have 50 cars, and I’m nothing at Pebble Beach.”

This year, the mood was high. A roaring stock market is boosting wealth and spirits, a new generation has taken up car collecting, and supercar makers like Ferrari, Lamborghini and Bugatti are reporting record demand.

Under the hood, however, the classic car world is undergoing a massive structural shift that could see entire segments of the market decline in value, while lifting others.

This week, I share the top intelligence from Monterey Car Week, as well as the five lessons for wealth managers and those serving high-net-worth clients. I also talk to the CEO of Lamborghini, Stephan Winkelmann, about his global outlook, and the CEO of Bugatti, Mate Rimac, about record demand for the company’s new $4.6 million hybrid.

Thanks for reading and an extra thanks to all of you who said hi in Pebble Beach. Send me your questions, story ideas and suggestions. Let’s keep spreading the Inside Wealth!

Best, Robert

The 1938 Alfa Romeo 8C 2900B Lungo Spider. Credit: Gooding & Company

Monterey Car Week saw more than 80,000 car collectors and fans roll into the peninsula. There were 11 auctions; dozens of parties, races and award programs; at least five unveilings of new supercar models; and four days of the most expensive traffic jams in the world.

It all wrapped up on Sunday with a weather-beaten, unrestored 1939 Bugatti Type 59 Sports winning the coveted “Best of Show” award at the Concours d’Elegance.

The energizing spirit of the annual Woodstock on Wheels (or more like “Davos of Driving”) ignites a passion for auto history and racing. But it’s also about dollars — and the more than $400 million worth of classic cars that crossed the auction block over four days.

Monterey marks the biggest test of the year for the high-end classic-car market — and is a useful barometer of the mood and money of wealthy collectors. I spoke with dozens of collectors, as well as some of the leading executives and power-players in the classic-car market, to take the market pulse.

Here are the five main takeaways:

1. Classic cars are still in correction

Last year, the auctions at Monterey dropped 14% as soaring prices after the pandemic became too rich even for the richest collectors.

This year, auction companies were predicting a rebound, saying sellers had lowered prices and collectors were ready to make deals. More than half the cars being sold were offered with “no reserve” or no minimum sale price, according to K500, the car-collecting research and data provider.

“We came through a meteoric rise post-pandemic, when we were seeing prices go up 30% a year,” said Dave Magers, CEO of Mecum Auctions. “As we came out of that, sellers were still expecting to see those kinds of prices in their cars. And so the first part of 2024 and the end of 2023 there was a big imbalance. Sellers had high expectations, and the buyers were becoming more picky about their cars and what they pay. I think the sellers’ expectations now have come down, and they’re in line with buyers expectations, and we’re starting to see sales starting to rebound.”

The problem was, they didn’t come down enough. Total sales at this year’s five car auctioneers in Monterey — RM Sotheby’s, Broad Arrow, Gooding & Co., Mecum and Bonhams — fell 3% from last year, to $392 million from $403 million in 2023.

Last year, classic cars were the worst-performing collectible (aside from whiskey), with 12-month prices down 6%. Even handbags and furniture did better than classic cars last year, while fine art was the best performer, up 11%, according to the Knight Frank Luxury Investment Index.

Given the Monterey results, it will likely be the second negative year for classic cars.

2. There's a generational shift

During the pandemic, a new generation of collectors poured into the classic car market, popularized by online seller Bring a Trailer and powered by soaring stocks and government stimulus. The younger collectors, mainly millennials and Gen Xers, as well as Gen Zers, have added fuel to an already scorching market driven for decades by baby boomers.

They also like different cars. Rather than the ’50s and ’60s muscle cars, Jaguars, Aston Martins and hyper-priced classic Ferraris popular with boomers, the new collectors prefer modern supercars from the 1980s, 1990s and 2000s. As the old saying in collecting goes: People collect what they liked as teenagers.

That change in taste, and buyers, is reshaping all the collectible markets. In the art market, Old Masters, Impressionists and even some Abstract Expressionist categories are falling in value and rising in supply, while artists like Basquiat and Banksy who are popular with the new young collectors keep rising.

In Monterey, the sell-through rate (or the percentage of cars that actually sold on the auction block) was an anemic 52% for pre-1981 cars priced at $1 million or more. The sell-through rate for cars less than 4 years old was a much stronger 73% — proving that young collectors are now in the driver’s seat.

Hagerty’s Supercar Index of sportscars from the 1980s through the 2000s is up over 60% from 2019, while the Blue Chip Index of 1950s and 1960s Corvettes, Ferraris, Jaguars and other storied classics, is down 3%.

Granted, a small number of rare, true masterpieces will still fetch high prices. The top car of the week was a 1960 Ferrari 250 GT SWB California Spider that sold at RM Sotheby’s for $17 million and the runner-up was a 1938 Alfa Romeo 8C 2900B Lungo Spider that’s one of only five in existence.  

Yet for the broader market, the cars that will gain value most will be those favored by younger collectors.

3. Boomers are downsizing

Even as younger collectors are bidding up 1980s to 2000s cars, the baby boomers are selling off their collections, leading to a surge in supply of older cars.

“There is just a lot of stuff coming to the market,” said McKeel Hagerty, CEO of Hagerty, the classic car insurance, auction and collector-community company. “And it’s going to be a great time to be a buyer.”

If there are buyers. Along with estate sales from past collectors, many older collectors are starting to downsize their collections while they’re alive. Their older cars are pouring into the market just as collector tastes are moving toward newer cars.

That has led to falling prices, even for some Ferraris of the 1950s and 1960s. A 1955 Ferrari 250 GT Competizione that sold in 2013 for $7.2 million was being offered for between $4.5 million and $5.5 million at Gooding in Monterey, according to K500. A 1968 Ferrari 330 GTS at Broad Arrow that sold for $3.3 million in 2015, and was being offered for between $1.9 million and $2.2 million, failed to sell.

The sheer amount of 1950s and 1060s cars for sale in Monterey also hurt sales. According to K500, “offering several highly specialised four-cylinder 1950s Ferrari sports-racing cars over one weekend was just too much.” It added that once-prized road trophies “struggle to resonate with newer buyers” and “are no longer the must-haves they once were.” 

The longtime holy grail of the classic-car world has been the Ferrari 250 GTO, with only 36 produced and often considered Enzo Ferrari’s masterpiece. A 1960 GTO sold at RM Sotheby’s last year for $52 million and one sold privately for over $70 million in 2018. Now, there are three for sale on the private market, according to brokers — by far the most in decades.

“The early 1990s was the last time we’ve seen this many on the market,” said Simon Kidston, one of the top advisors to ultra-wealthy car collectors.

Just as pre-war cars are becoming rare at auctions, since few sellers want to realize the loss and auctioneers have a hard time selling them, pre-Reagan era cars may soon become tougher to unload.

4. Interest rates matter

The rise in interest rates in 2022 and 2023 has impacted the classic-car market at both the high end and low end.

At the entry level, many collectors finance their cars with loans, either from auction houses or other lenders. Estimates vary, but some say that up to half of cars sold for less than $500,000 at some auctions since the pandemic have some type of financing. As rates have gone up, the costs of loans and purchases have also soared, leading to fewer deals.

At the top end, higher rates increased the opportunity costs for wealthy buyers of putting their investment dollars into cars.

“People think, ‘Instead of that million-dollar car, I could be earning 5% maybe 10%’ if you've got a great manager,” Kidston said. “That, more than anything else, makes people think twice. A collector car is partially investment. There’s no other single reason for the increase in the value of collector cars over the last 40 years than the investment angle.”

With rates expected to come down at the end of this year, that opportunity cost may decline. Yet for now, higher rates mean lower demand at the highest and lowest levels of the classic-car market.

5. RADs and RestoMods are hot

Along with ’80s and ’90s cars, known as RADs, the latest trend in classic cars over the past few years is RestoMods — old cars that have been rebuilt with fully modern electronics and amenities. Some models are fetching prices of up to $500,000.

“RestoMods are really getting a lot of attention now,” Magers said. “The cars that are done really well, are like 1963 split window [Corvettes] that are basically brand new cars off the showroom floor with new technology. When they first came out, they were kind of an abomination. The question from collectors would be, ‘Why would you take a beautiful car and do that to it?’ Now they're looking for those cars, and they're bringing premium prices.”

RestoMod Broncos, Jeeps and older SUVs are also big sellers with the under-40 collectors.

“For that younger collector, they think, ‘I want to put that at the beach house. I want to put that at the mountain house, the cottage,’” Hagerty said. “That’s what they want. They’re easy to drive, you turn the key and they start.”

Lamborghini CEO Stephan Winkelmann and Robert Frank at Monterey Car Week. Credit: Crystal Lau | CNBC

The so-called “YOLO effect” among ultra-wealthy consumers is helping to power continued orders and demand at Lamborghini CEO Stephan Winkelmann told CNBC.

“Despite the crises and geopolitical situations around the globe, there is still this YOLO effect, or ‘you only live once,’ and this is very important,” he told CNBC. “So far, we’re going very strong.”

The company’s new $610,000 super-car, the Revuelto, just went into production last summer and is already sold out until the end of 2026, Winklemann said. He said orders and foot traffic at dealerships, as well as prices for pre-owned Lamborghinis, also show continued strength. The company delivered 10,112 cars last year and is on track to have “another very, very good year.”

He said the surge in wealth creation around the world has created a larger addressable market, making the company less prone to sudden downturns — even if the economy softens.

“In comparison to a decade ago, there are more people able to spend this amount of money on cars,” he said. “So this is a growth of the wealth in general, and this is positive for us.”

The latest test for Lamborghini’s demand will be the new model called the Temerario, which Winkelmann unveiled during Monterey Car Week. The car, which starts at $350,000, replaces Lamborghini’s popular Huracan model, which was produced for a decade. The Temerario has a hybrid powertrain that delivers 907-horsepower through a twin-turbo V-8 paired with three electric motors.

Along with the Urus SUV and the Revuelto, the Temerario makes Lamborghini the first super-car company to have an all-hybrid line-up.

“The promise was to have more performance than a generation before and to reduce drastically the CO2 emissions,” he said. “We are entering at the right time with the right products.”

One negative is China, where demand for super cars has fallen with the economy. Winkelmann said that because China only accounts for 10% of sales, the company can shift sales to other parts of Asia.

“The Asia-Pacific region generally is going very well,” he said.

Given the popularity Lamborghini’s new lineup, Winkelmann had advice for potential buyers, especially in the U.S.: “Be prepared to be very patient.”

The Bugatti Tourbillon. Credit: Bugatti

With the magic combination of added power and lower carbon emissions, hybrid powertrains are becoming “the “new arms race” in super cars, said Bugatti Rimac CEO Mate Rimac.

Rimac said Bugatti’s new $4.6 million hybrid super-car, the Tourbillon, sold out “immediately” when it was unveiled in June. “It was one of the best successes we’ve ever had at the company,” he said.

Rimac Automobili, the Croation producer of electric supercars, took majority control of Bugatti in 2021, naming the new combined automaker Bugatti Rimac. Founder Rimac said that when it came to announce the newest Bugatti model, many expected it to be electric.

“There was a lot of pressure to make the next Bugatti electric from, let’s say, shareholders,” he said. “But when you have two brands, Bugatti and Rimac, in the same company it’s like having two canvases where you can draw things in two different ways. At Bugatti, with the 115-year tradition of the brand, it’s still about craftmanship, it’s about the mechanical feeling of the car. We believe that the combustion engine is still very important.”

The Tourbillon’s naturally aspirated 16-cylinder engine is paired with three electric motors to produce 1,800 horsepower. Rimac said the “emotional” naturally aspired engine, combined with the power and acceleration of the electric motors, gives today’s ultra-wealthy buyers the best of both worlds. Hybrid power, he said, has quickly become the new battleground for supercars.

“It’s an arms race and you need to have a hybrid powertrain to keep up right now,” he said. “Without a hybrid powertrain in the super-car or hypercar world, you cannot achieve full performance.”

Rather than killing off combustion engines, he said, electric motors may have saved them, by improving their performance and carbon emissions.

“A high-performance electric powertrain basically enabled an emotional combustion engine,” he said. “It’s a big, outrageous, old-school engine. It’s not state-of-the-art, but we have given it the performance with the three electric motors.”

Since Bugatti buyers are among the wealthiest in the supercar world — said to have an average of 30 cars, two yachts and a private jet — they’re rarely impacted by economic slowdowns. Yet Rimac said his customers show no signs of reducing their spending, at least when it comes to Bugattis. The Tourbillon was offered initially only to existing Bugatti clients and all 250 being produced “basically went to existing customers.”

“We see the strongest demand in our history,” he said.

While Bugatti was a reputational asset but money-losing brand under Volkswagen, Rimac said Bugatti is now profitable as a standalone business.

“Going forward we have very high goals when it comes to the profitability and margins we can achieve.”

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