JD Classics, what have they been up to?

[RichB]

LotusOmega375D said:

I remember a Ferrari 250GTO restoration being featured in an Octane a few years ago. It needed pretty much everything doing and cost £100K to restore by a marque expert. That was considered massive bucks back then. That’s the bottom line figure banded about for restoring common or garden E-Types nowadays, which are worth 0.5% as much! It’s just not worth that sort of money.

I just don't get why the restoration costs should be charged as a percentage of the ultimate value. Surely, more or less, the costs of skilled metal workers, trimmers and engine builders are the same regardless of whether it's an E-Type or Ferrari they are working on. It's one aspect of the restoration trade that annoys me...

[havoc]

DonkeyApple said:

What the market doesn’t need right now is lenders reigning that in.

Indeed.

So it's now down to the cojones of the lenders, and game theory - do they take the long-view that a soft landing is better for them (for everyone) than a crash, and sit happily on current lending while still advancing against reasonable risks (i.e. buyer with 30+% 'equity'). Or do they start squeezing it all down to minimise their exposure, and in doing so risk precipitating the crash that'll hurt everyone including them...

...knowing that it only takes a couple of lenders to start squeezing and anyone whose taken the long view will be hurt worse...

RichB said:

I just don't get why the restoration costs should be charged as a percentage of the ultimate value. Surely, more or less, the costs of skilled metal workers, trimmers and engine builders are the same regardless of whether it's an E-Type or Ferrari they are working on. It's one aspect of the restoration trade that annoys me...

Look at housing - extensions, kitchen fitting, etc. - prices have jumped by an easy 50% in the last 7 years. And you never see a poor builder...

Same principle - those in the 'improvement' game look at the cost of the alternative (trading-up, to a better car or better house), and work out that they can now charge more for their services, as the cost of the alternative has increased substantially. So they do...a decent house extension (e.g. over-garage) 10 years ago was sub-£50k. Now try getting it done for <£100k...

Is it right? Nope.
Is it legal? Yes.
Is this what a free market is based on? Sadly yes.

[RichB]

havoc said:

RichB said:

I just don't get why the restoration costs should be charged as a percentage of the ultimate value. Surely, more or less, the costs of skilled metal workers, trimmers and engine builders are the same regardless of whether it's an E-Type or Ferrari they are working on. It's one aspect of the restoration trade that annoys me...

Look at housing - extensions, kitchen fitting, etc. - prices have jumped by an easy 50% in the last 7 years. And you never see a poor builder...

Same principle - those in the 'improvement' game look at the cost of the alternative (trading-up, to a better car or better house), and work out that they can now charge more for their services, as the cost of the alternative has increased substantially. So they do...a decent house extension (e.g. over-garage) 10 years ago was sub-£50k. Now try getting it done for <£100k...

Is it right? Nope.
Is it legal? Yes.
Is this what a free market is based on? Sadly yes.

I guess this is why, when you have a large collection, it is better to employ one's own team to look after them than out-shop the work to the trade. In that why one can dictate the salaries.

[sng45]

classicaholic said:

It’s not going to be just the big boys though, I was talking to a chap at Goodwood who has taken a drop of 17k on an E Type in a year, if that was borrowed money then it takes a lot of finding. There are plenty of ‘investors’ who bought cars using borrowed cash who must be loosing a bit of sleep at the moment.

All my cars are paid for and my toy box & not for sale so I have no axe to grind!

A drop of £17,000 in a year would be quite attractive on a modern car - just needs a change of mindset and everything's OK again !

I think the consideration has more recently become that you buy a classic ( old) car and the expectation/assumption is you're guaranteed a significant increase year on year - similar to the general viewpoint on house buying, re-calibrate and substitute "modern" for "classic" and the job's a good 'un !

[singlecoil]

havoc said:

Look at housing - extensions, kitchen fitting, etc. - prices have jumped by an easy 50% in the last 7 years. And you never see a poor builder...

Same principle - those in the 'improvement' game look at the cost of the alternative (trading-up, to a better car or better house), and work out that they can now charge more for their services, as the cost of the alternative has increased substantially. So they do...a decent house extension (e.g. over-garage) 10 years ago was sub-£50k. Now try getting it done for <£100k...

Is it right? Nope.
Is it legal? Yes.
Is this what a free market is based on? Sadly yes.

And yet as you say it is a free market, and house owners are free to get other quotes. Builders can look at whatever they like when deciding how much to ask but if they ask a higher number than another builder then they are not going to get the work.

[suffolk009]

DonkeyApple said:

If they thought independently but it really works far more as a collective. Most of the lenders to the market are subsidiaries and secondaries who borrow themselves from a prime bank. One of those prime banks has just been kicked in the nads, the desk that wrote the deal will be wanting to keep its head down and the heads of desks at other banks will not be wanting to get themselves kicked in the nads. There will be caution all round. But more importantly, the money that would ha e gone to them for more lending will go to other desks and this means there will be less new money into the market. But at the same time they will be wanting to make sure existing loans are secure and some of those might be deemed weak and need reviewing etc. And this is all happening when prices have been soft for a while and buyers haven’t been in quite the rush as in the past.

Whether it all adds up to anything of great significance only time will tell.

Are financed cars similar to Buy to Let houses, in as much as if the value of the asset falls then the purchased is told by the lender to add some capital back into the pot?

eg. Your car cost £1m, you put £200,000 down, borrowed the rest. But the car is now only worth £800,000 so the lender demands that you attend to the situation by paying off £160,000 of the debt. Immediately. This maintains the 20% cash in the asset. Great if you have the cash, if you don't or are unwilling to further fund the asset, then the car trots off to auction.

It's a real question, I dunnow.

But if that is the case, then it will only take a few cars to be put into auction that don't find buyers to lead to the next one going under the hammer no-reserve and setting a new low price. And then the whole house of cards tumbles.

Investment bubbles, tulip mania, dotcoms, Boom and Bust - it just can't be avoided (just ask Gordon Brown).

[TooMany2cvs]

C4ME said:

I can see how we may be heading here again. I have been a fairly close observer of the classic Porsche restoration scene over many years and as the prices of the cars have skyrocketed so have the restoration costs. Work that would have cost £10,000 five years ago now costs £30,000 today for the same work and quality. This pricing strategy might have been sustainable in a rising market but doesn't work otherwise. The drop off can be sudden as a result.

There's really only one possible reason for this - "because they can". Hourly labour rates have rocketed, and/or the number of hours being charged is being padded massively.

RichB said:

I just don't get why the restoration costs should be charged as a percentage of the ultimate value. Surely, more or less, the costs of skilled metal workers, trimmers and engine builders are the same regardless of whether it's an E-Type or Ferrari they are working on. It's one aspect of the restoration trade that annoys me...

Again, "because they can".

And, frankly, I don't have a lot of sympathy for those bleating that their lucrative milking of their clients is ending and they're going to have to go back to working on normal margins. Boo. Hoo.

[2172cc]

It's an interesting debate and the subject is being covered in great detail and with some expertise by all. This could be as mentioned earlier a defining moment in the classic car world or just blow over and carry on as normal but somehow I suspect the former will be the case.
On a slightly different note, I visited JD a couple of years back on one of their open days when Ross Brawn was guest speaking and was totally taking in by the scale of the operation. The showrooms and workshop as well as the stock were on a different level to anything I'd seen before and I can see how a prospective client would not be anything but impressed or seduced into buying. I kept thinking all the time I was there, what the overheads for a place like this would be just to cover the running costs before they were earning any money. Of course we now know what what was going on.

[a8hex]

singlecoil said:

havoc said:

Look at housing - extensions, kitchen fitting, etc. - prices have jumped by an easy 50% in the last 7 years. And you never see a poor builder...

Same principle - those in the 'improvement' game look at the cost of the alternative (trading-up, to a better car or better house), and work out that they can now charge more for their services, as the cost of the alternative has increased substantially. So they do...a decent house extension (e.g. over-garage) 10 years ago was sub-£50k. Now try getting it done for <£100k...

Is it right? Nope.
Is it legal? Yes.
Is this what a free market is based on? Sadly yes.

And yet as you say it is a free market, and house owners are free to get other quotes. Builders can look at whatever they like when deciding how much to ask but if they ask a higher number than another builder then they are not going to get the work.

At least around here there is a shortage of builders, the guy we'd been recommended by the architect and friends told us he had 8 customers looking to have work done when we hoping to have our extension built and he was just waiting for the first one to firm up with planning permission etc.
There are so many people wanting to extend their house there aren't enough good/trusted builders to go around at the moment.
So as you say, market forces, they can currently afford to push up prices.
Looking around the area I think there are now a few houses being done up where I get the feeling that groups of the guys who work for some of the local builder or contract out with them, have bought the houses to do up and sell on. So even the trades are now moving up the food chain and becoming property developers.

[a8hex]

TooMany2cvs said:

There's really only one possible reason for this - "because they can". Hourly labour rates have rocketed, [b]and/or the number of hours being charged is being padded massively.[b]

Maybe there is padding happening, but also people are asking for far more complex work to be done. Programmes like Grand Designs and many others on TV have shown fancy styles which are difficult to achieve and take far long to do. Also the rules about how many things can be done are different, for example our simple glass conservatory needed to have deeper footings than our house has! the isn't quite 25 years old, but that is what building control insisted on.

I suspect that there is a similar degree of inflation happening in the car renovation business, many people having their cars rebuilt now are expecting way better than new quality. Look at the engine build shops in many places now and they are like operating theatres.

[TooMany2cvs]

a8hex said:

TooMany2cvs said:

There's really only one possible reason for this - "because they can". Hourly labour rates have rocketed, [b]and/or the number of hours being charged is being padded massively.[b]

Maybe there is padding happening, but also people are asking for far more complex work to be done.

The line I quoted specifically said...

C4ME said:

Work that would have cost £10,000 five years ago now costs £30,000 today for the same work and quality.

<my emphasis>

[Dinoboy]

The one big benefit for us mere mortals as per the last bust was that there were lots of cars on the market that had been restored, often at double or more than their asking prices. Not to mention that without the boom a number of cars would of practically disappeared altogether. I remember speaking to a Ferrari owners club member who said that 246 restoration costs made them economic suicide to restore at 'normal' prices.

[T70RPM]

... Don't dismiss restoration costs. It takes 2000 hours to restore an EType properly. Figure that at £50 / hour ...a rate you'd be delighted to pay at your local Vauxhall dealer...and you get 100K labour alone. Buy repro chrome..it doesn't fit.... repair rusty chrome ....a pair of bumpers could cost 5K . I think some people have no idea what it costs to restore a car to as new condition.
Most restorers labour rates are well below motor industry standards...and parts / processes cost a fortune. Had a proper panel beater work a bonnet until it's right? Lead loading? Not normal skills. It costs a fortune to restore a car properly and buying a snotter and restoring it is not a business proposition. It relies on someone blowing their brains out financially...most restorations are not economical but emotional decisions (or should be) and the cost of doing it is NOT likely to come down.... whatever happens to the value of the end product.

[_Sorted_]

Padding of invoices.

Jim Stokes Workshop - JSWL - lost a court case a few years ago with time invoiced being a factor.

http://www.wilmotslitigation.co.uk/blog/2014/11/18...

[EXKAY120]

Hood was once a dentist i hear ???

[V8 FOU]

T70RPM said:

... Don't dismiss restoration costs. It takes 2000 hours to restore an EType properly. Figure that at £50 / hour ...a rate you'd be delighted to pay at your local Vauxhall dealer...and you get 100K labour alone. Buy repro chrome..it doesn't fit.... repair rusty chrome ....a pair of bumpers could cost 5K . I think some people have no idea what it costs to restore a car to as new condition.
Most restorers labour rates are well below motor industry standards...and parts / processes cost a fortune. Had a proper panel beater work a bonnet until it's right? Lead loading? Not normal skills. It costs a fortune to restore a car properly and buying a snotter and restoring it is not a business proposition. It relies on someone blowing their brains out financially...most restorations are not economical but emotional decisions (or should be) and the cost of doing it is NOT likely to come down.... whatever happens to the value of the end product.

Very true.

I have always said that it is almost impossible to make your headline rate on a long term job. So, if I normally charge £60ph for work, I would be very lucky to see that on a 500 hour job. More like £25-30ph. So, the increases in restoration costs are, I belive, due to businesses getting near to their headline rate for the work because of the increase in vaue of the vehicle. And hurrah for that. Ask anyone in this line of work and they will agree.

[Doofus]

EXKAY120 said:

Hood was once a dentist i hear ???

Do you write crosswords for a living?

[DonkeyApple]

suffolk009 said:

Are financed cars similar to Buy to Let houses, in as much as if the value of the asset falls then the purchased is told by the lender to add some capital back into the pot?

eg. Your car cost £1m, you put £200,000 down, borrowed the rest. But the car is now only worth £800,000 so the lender demands that you attend to the situation by paying off £160,000 of the debt. Immediately. This maintains the 20% cash in the asset. Great if you have the cash, if you don't or are unwilling to further fund the asset, then the car trots off to auction.

It's a real question, I dunnow.

But if that is the case, then it will only take a few cars to be put into auction that don't find buyers to lead to the next one going under the hammer no-reserve and setting a new low price. And then the whole house of cards tumbles.

Investment bubbles, tulip mania, dotcoms, Boom and Bust - it just can't be avoided (just ask Gordon Brown).

There are numerous ways that cars are being financed out there from the straight high street loan which is dislocated from the asset to the multimillionaire businessman who’s entire real wealth is his equity holding in his business and against which he borrows in order to buy houses, cars, boats, planes, women etc.

A sell off in car assets by a lender could be triggered by a recession in the rubber stamp industry if there are cars whose debt is being secured by the stock value of a rubber stamp company.

In the reverse, there are cars that are being used as the security for loans, especially in the tax efficiency game. A weaker market will see those kind of loans remargined or even called in or the asset sold.

Plenty of classic car owners have mortgages or business loans. Those can all be remargined. Property market weakens the lender will increase their margin requirement. Owner’s income falls then the lender will increase the margin requirement. Rates rise and the client fails the lender’s affordability review so is remargined to reduce the loan amount to meet affordability. Business slows, lender won’t lend more, wants more security or calls in loans. Owner needs to sell assets to bridge that gap.

And just straight classic car loans, many (for all I know all, which would be perfectly logical as no sane lender would lend against an asset without protection over the value of that asset) have provisions to trigger a review of terms.

In reality, when a man faces an economic squeeze or a need to raise money then generally they will do whatever it takes to protect the family home and will look to the lesser assets to convert to cash. Classic cars tend to be at the bottom of that list. First out the door. They are a personal indulgence. Faced with needing to find £150k because your mortgage lender has remargined your family home during one of the biannual reviews (note how lenders have so heavily incentivised clients to switch to 2 year rollover models!!) you’re going to struggle justifying to the family that the EType is essential to keep over the house. Even watches score better as they are easier to justify holding as a child’s inheritance.

So off to the auction house goes the Etype you paid £200k for. No reserve as your bank wants it’s £150k to allow you all to keep staying in that family home. The car market is a little soft and the buyers that are about are being particular. They don’t want that Etype that has been restored by someone of not quite the right pedigree, the Etype that doesn’t have the perfect history or the Etype which has all new bolts that don’t have the right three letters showing. The speculators aren’t there because the market is no longer a sure fire win, that ship has sailed, its vintage butt plugs where all the action is now. Most of the specialist lenders have stopped lending as their prime broker won’t increase their lines any further and anyway they are focussing all of their time on looking at their existing risk book so no one who needs to borrow is at the auction. At the auction that you have committed, with the bank, to selling at the hammer drops at £50,000 as that was where the buyer was found, who transpired to be one of the very few people with actual cash and who just fancied an old Jag and didn’t already have one. He went to buy a rare Allegro but what the hell.

The media starts talking about the £200k Etype that sold for £50k. The media completely ignores that the act was unique to the chump who had borrowed too much and was being forced by his mortgage lender to liquidate assets by next Friday or be introduced to Gary in their ‘property restructuring department’. That’s not an exciting story. Front paging that the classic car bubble has burst and that everyone called Tarquinius is about to get reamed a new one is a wonderful story.

The lenders really know the party is over now that the tabloids are plastering it everywhere. No one is going to be turning up at the auctions or dealers looking to pay more than the last person for any car (paying more validates your belief that prices are going up and that you’ll make money). Quite the opposite, the mindset has changed. Anyone who does turn up will be looking to pay less than the last person (you need to pay less to protect yourself from the possible downturn).

The media takes that lost 10% upswing, adds it to that 20% reduced speculative offering and publishes that prices have collapsed 30% overnight as their next story. In reality, prices have changed at all as of yet.

Now the banks really start winding in their loan books. The classic car lending desk is no longer in bonus focus mode but career protection mode. The idea of bonuses has now gone. They aren’t going to be writing more business than last year, no targets will be met but if they have the biggest losses of any of the desks that year then they know their bank will announce that they have ended lending against cars thus allowing the desk to be made redundant. None of them want to made redundant. Firstly, they are so heavily in debt that they can’t survive 6 months without premium pay. Secondly, their CV is going to be announcing that they are one of the losers who lost their bank millions on the stupid car market that everyone (now!) always knew was a folly, a kiddies market. No one is going to employ one of those total losers at anywhere near market rate. No, the desk is screwed. The only possible way to survive is to show your bank that you are the man. The ruthless bd who when the chips are down will swing a battle axe at every single client on your books and decimate them to tear every single last penny out to bolster your bank’s books. So off you go, you blanket nail the bread and butter clients and invest your time in sifting out the big fat juicy ones to lay into on a bespoke basis.

And off the market goes. It doesn’t matter how many people own outright. It doesn’t matter what badge is on the car. Nothing matters but pure, natural market forces. And there is no central entity to moderate or underpin. It is a pure market that will flow relentlessly with sentiment.

Or maybe he doesn’t get to the point that he has to dump his Etype in an auction. Maybe he puts Sandra back on the game and removes a child or two from school and so the whole market keeps ticking along.

Edited by DonkeyApple on Saturday 15th September 11:03

[DonkeyApple]

EXKAY120 said:

Do you write crosswords for a living?
Of course i do.......

Custard or you would have answered ‘ Bergoglio is but others may well be not’.

[_Sorted_]

DonkeyApple said:

Maybe he puts Sandra back on the game

Edited by DonkeyApple on Saturday 15th September 11:03

I feel sorry for Sandra. Finds her Richard Gere and all of a sudden she is back on on her back. Jaguar have a lot to answer for.