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Crunch time
Some auction houses are denying any knock-on effects from the credit crunch, but they do exist
Is the credit crunch only affecting the affordable cars market? Or are its effects being felt across the board? Most auction houses will have you believe that they are immune, as their customers are investing in tangibles rather than stocks and shares, that the credit crunch has had little effect on their sales. It’s understandable that they don’t want to ‘talk down’ the market when things are hard enough as it is, but what is really going on in the wake of the banking crisis?
Motor Sport approached straight-talking Simon Hope of H&H Auctions to see how its latest sale at Haynes International Motor Museum on October 12 went, and whether the market is as stable as some people are claiming.
“The economic climate has been bad in recent weeks for people to make decisions,” says Hope. “The problem is that a lot of people are waiting to see what happens and, although there’s business out there, it’s only for the really good stuff. It was a difficult day right across the board at Haynes, but the good items sold well.”
According to Hope, the perception that the affordable cars market is the only one suffering isn’t entirely true. “No, it’s right across the board,” he says. “If you’ve got something that somebody wants, then the money’s there to buy it. If you’ve got something that nobody wants then it doesn’t matter how cheap it is, there’s no money for it – the market is very polarised. Good is good – it doesn’t matter if it’s a £5000 car, or a £500,000 car. But people are not putting money into average quality items.
“We grossed in excess of £1 million and sold over 50 per cent of the lots at Haynes. Compared to our normal sales rate that is a disaster, but considering the rumours that were flying around about what the markets were going to do on the Monday when they opened, I think it was a very good result indeed. We probably had the worst weekend possible to try and sell cars during this banking meltdown.”
It’s doubtful that the current financial crisis is going to be over any time soon, so H&H and its rivals need to weather the storm. “Running any business properly is a matter of keeping the overheads under control, thereby being able to charge the right amount, and doing the right thing for your customers,” says Hope. “We’ve done that since we started and you just keep on doing as many of the good things as you can. We’ve realigned some of our marketing which will result in an increase in our marketing spend for the next 12 months, and all the tenders, be them private or public, and the private treaty sales have worked very well this year and I believe they are set to continue to do so.
“None of us has any idea what’s going to happen. Everybody can second-guess but I’m old enough to have lived through several recessions and they’ve all been different in some way. We’ll find out what this one’s about when it defines itself. All we know is that, for the first time in my memory, the banking system has shot itself in the foot instead of us. They have always led booms by lending too easily and then starved us into the void by not lending unless you had the money in the first place. This time they gambled with our money and lost. That’s never happened before.
“One of the things that we have always done is pay clients in eight working days from the sale, unlike some of our competitors who can take over a month or more,” Hope adds. “But because of the worry people have in the banking system at the moment, we are running the payment schedule daily so that as soon as we have cleared funds for a sold car, we’re sending the cheques out to the vendors – literally the same day. We feel it’s prudent and right in these difficult times to stop them worrying about where their money is. As we operate a client account they’re not worried about us but the banks themselves.”
H&H deserves credit for its policy on payment, and Hope’s honest assessment of the current climate is refreshing. Perhaps the fact that H&H has admitted sales are affected, and that it does have to tighten its belt, means it will weather the storm better than others.