When Cars Meet Chocolate

As a purchasing professional, I obviously have my fair share of bidding initiatives and in some cases, reverse auctions. However, earlier this month, I experienced a completely different type of procurement. I drove a few hours west to the “Sweetest Place on Earth” to attend the Hershey Car Show. This car show is often referred to as the World Series of Automobiles, as people travel from all over the world to attend. Not only was I able to catch a glimpse of the workings of a car auction, I also learned firsthand how buyers and sellers negotiate the pricing of classic cars.

On the eve of the car show, RM Auctions hosted a live auction at the Hershey Lodge where antique automobiles were placed up for bid. Chocolate in hand, I tried to sneak my way into the actual auction event and ended up stationing myself behind the curtains (sad, I know) where I listened to the sales prices climb. I eventually grew impatient with “Sue on the phone” and “Number 23” and was ready to leave. The cars being auctioned off were stationed outside in one of the facility’s many parking lots and were ushered in through a garage entrance way. I left the auction room to view the other cars that would take the stage later on. It turned out to be a chilly night and so once I was outside, I was immediately drawn to what appeared to be a bonfire. Little did I know that I was making my way over to the grand finale of the auction being warmed up before it would be driven up on stage for bidding. I ended up laying my eyes on a prized treasure known as the 1884 De Dion Bouton Et Trepardoux Dos-A-Dos Steam Runabout. It is the world’s oldest running car and was sold for a whopping $4.62 million. The winning bid was actually $4.2 million and RM Auctions slapped on a non-negotiable 10% buyer’s premium which added $420,000 to the price tag. The car was only projected to go for about half the selling price. Unfortunately, I was not able to listen in on the back and forth bids, but my guess is that two individuals eventually got into a bidding war where one finally surrendered.

On the day of the actual car show, I walked around the grounds admiring beautiful craftsmanship in machines such as LaSalle’s, Packard’s, Rolls-Royce’s…basically Jay Leno’s garage. I attended the show with a car enthusiast who has enjoyed the hobby for over 40 years. We walked around the car corral which is an aspect of the show that I was unaware of until I got there. The corral is where a number of sellers bring their cars and put them up for sale. Therefore, several negotiations take place here if there are some interested buyers. These negotiations are obviously not as sophisticated as business negotiations but are pretty similar to the negotiations that take place at any basic car dealership.

These days, a classic car is a better investment than a home as certain types never really depreciate over time. However, the total cost of ownership should be considered before making this type of investment. There is a great deal of maintenance that needs to be performed in order for the car to hold its value throughout the years. I’ve grown very close to the proud owner of many classic cars ranging from a 1970 Volkswagen Beetle to a fully restored 1924 Jordan. He is more than an expert on antique automobiles having won multiple awards at Hershey and several other car shows.

And so I decided to pick his brain on the factors that impact classic cars’ pricing. Some of the factors are similar to the modern cars we purchase today, but there are others I was unfamiliar with that also play a role. Similar to commodities, there are numerous publications that provide market information, specifically antique automobile appraisals. Sellers usually try to justify the price of their car based on these published rates and stick to them. It is helpful to use them as a price guide but there are a number of other factors that dictate the price of an antique car.

In Hershey, sellers will buy a spot on the corral for about $150 which gives them access to a wide audience of prospective buyers. Most of the vehicles are overpriced, expecting that demand will be high and they might get lucky and hit a home run. Most of the time, you get what you pay for and buyers usually never purchase for the price the seller is asking for. One of the key differences that should be noted when purchasing a classic car is whether or not it is completely original or has been fully restored. The value of the car will depend on whether or not it was built with the original materials. Many car deals these days take place over eBay rather than at car shows. Having never negotiated on either platform, I cannot speak to which one makes the more sense. However, my guess is that you waste less time on eBay than at car shows, but car shows may help you identify more leverage points as you can see the car in person from the get go.

The classic car owner offered up some food for thought when I inquired about the total cost of ownership and whether or not it offsets the ROI. He referred to a personal experience when he bought a Corvette in 1972 for about $5100. About 6 or 7 years ago, he sold the car for over $30,000. The car only had about 20,000 miles on it. It would be interesting to see how far that money would have gone if it had been invested in another form such as a bond. If you take into account the time spent maintaining the car, keeping it registered and properly insured, both investments may deliver the same return once everything is netted out. Some individuals even go as far as to incorporate their automobiles into their business to cover some of the expenses as tax write-offs which then increases their ROI.

I highly encourage attending the Hershey Car Show next year and experiencing everything it has to offer. The hot dogs weren’t great, but the lemonade was refreshing. And overall, it was good, clean fun. The weekend has something to offer all ages…the show, the park, the outlets…just be aware that attendance is very high and hotel rates will be almost double the going rate, so plan accordingly.

As a company often engages Source One for strategic sourcing expertise, I engaged an individual who has been around the classic cars market for about 40 years. If I was able to follow through with an actual purchase, I have no doubt that he would have been able to identify the best deal out there for what I was looking for in a classic car. He knew the right publications to read, the car shows to attend, the mechanics to turn to for maintenance and repairs, etc. He also was a master negotiator and played all the right leverage points. Source One provides similar guidance to companies looking to achieve hard-dollar savings for the products and services they purchase to operate their business.