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State of the Porsche Collector Car Market: Up,

Down or Sideways Presented by Nathan Merz

Tech Tactics West-November 2016

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Presentation Summary •  Who has been to my presentation before? •  Introduction — Who is your presenter? •  Basic Caveats •  This Crazy Current Market! Updates from Summer 2016 to Current •  Overview of the Models: What’s hot, what’s up and what’s down •  Are We in a Bubble? •  Prices •  What do the Grades mean? •  Factors affecting price •  Where to find/ Where to list •  Safe payment and titles •  Q&A

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Who is Your Presenter? •  Lifelong Porsche Fanatic with a passion for the

history, engineering and experience of the brand

•  I have owned almost every model of Porsche built (No Porsche Supercars though…) from 356’s to 991’s with a particular affinity for Air-Cooled 911’s

•  Just like many of you I always thought this would be a dream job, well here I am!

•  I work with clients all over the World to help them both buy and sell Porsche’s of the finest quality

•  I buy/sell ~120 Porsche’s per year and inspect hundreds of them, I see Porsche’s in my sleep…

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Basic Caveats

•  The Porsche market is dynamic and fast moving, this presentation was out of date just after I completed it!

•  I can’t possibly cover every nuance, market niche or model

•  There is always an outlier or exception to every rule

•  Please buy the Porsche that fits your intended purpose

•  These are opinions grounded in my experience, not a guarantee!

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“Crazy” Current Market Hagerty—Collector Portfolio as of June 2016- Parade

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“Crazy” Current Market Hagerty—Collector Portfolio

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So… Overall Market??

Simple Answer The market has entered a plateau phase after 5 years of record growth.

Complex answer The Porsche market is still excellent; some models are still SCORCHING hot, some are warm, many are flat and a few are dropping (but not to previous levels!).

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Scorching, About Right, Cooling Off

•  Scorching- True #1 & 2 Survivors, 964 manual coupes, 3.2 Carrera G50 Coupes, 3.2 M491, Mid-Year 1974-1977, 1976-1977 Carrera 3.0,, Euro only RS models (964RS,993RS, GT2), 996TT, 914 2.0 73-74,928 early and late

•  About Right- 356 all models, SWB, Longhood LWB 69-73, 1974-1976 Carrera 2.7, 1978-1986 911, 930 1975-1977 &1989, 993 NA, 996 & 997 GT2 & GT3 especially RS, 991 GT3 RS,Cayman GT4, Any watercooled Porsche (986,987, 996,997), 991 GT3, 928, 944 Turbo

•  Cooling Off- Early “S”, 73 Carrera RS, 1989 Speedster, 930 1978-1988,RS America, 993 C2S + C4S, 993TT, 991- Apart from 991 almost entirely due to over saturation on market.

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Current Great Values? •  Any Mezger Motor Based Turbo’s: 996TT, 997TT •  911SC and 3.2 Carrera 915 cars •  Air-cooled 911 Open Cars •  914 2.0 liter •  2006-2012 997 •  2006-2012 987 •  Well Sorted 996/986 •  Any previously hot model if it can be bought at a discount! •  “Panicked” sellers….

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Are We in a Bubble? •  Simple Answer- NO, a bubble “POPS”. The market is simply

correcting.

•  The market seems to have peaked ~ Summer 2015

•  In the past 6 months several models have flattened or shown slight decline

•  Large number of speculators had entered the market

•  A greater supply of inventory has recently come on the market vs. 12 months ago

•  Growth rates were not sustainable on many models

•  Driver quality and lower cars trading for strong money is predictive of a concern

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My Prediction •  Incorrect Pricing will lead people to perceive larger drop then

actual. •  Many Porsche’s were undervalued historically, current values

are closer to market correct •  These cars are unique in that they have true global demand and

appeal across all ages •  Overall Market will enter into a Plateau phase •  True #1 Cars and VERY rare sub-models will still see strong

price growth •  Delta between true top tier cars and lower tier cars

will widen •  Continued strength of the dollar and weakness of the Euro will

weaken prices for models commonly sold into Europe. •  Potential drop in values for sub-par cars and over saturated

segments

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What Does that Mean? •  DON’T buy a Porsche as an investment, buy it because

you love it •  If you buy wisely you will limit your exposure to wide

swings in values •  In a cooling market you can take you time to make a better

purchase and find nicer cars!! •  Stop obsessing about values and just enjoy the cars!

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Prices •  The first key of setting a price, is knowing

what you have •  Take the time to learn enough about the model to know its

relative place in Porsche history, the general pro’s and con’s of the model and its relative desirability

•  Understand how to grade a car, where does this specific car fit in relation to others?

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Grade 1 Cars: The “Unicorn” Defined by Hagerty as— •  Condition #1 vehicles are the best in the world.

The visual image is of the best car, in the right colors, driving onto the lawn at the finest concours

•  Perfectly clean, the car has been groomed down to the tire treads

•  Painted and chromed surfaces are mirror-like. Dust and dirt are banned, and materials used are correct and superbly fitted

•  The one word description for #1 cars is "concours”

True #1 Cars don’t exist in the wild, they are created through hundreds of hours of work

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Grade 2 Cars Grade 2 as defined by Hagerty— •  #2 cars could win a local or regional show. They can be former #1 cars

that have been driven or have aged •  Seasoned observers will have to look closely for flaws, but will be able

to find some not seen by the general public •  The paint, chrome, glass and interior will all appear as excellent •  No excessive smoke will be seen on startup, no unusual noises will

emanate from the engine compartment •  The vehicle will drive as a new car of its era would •  The one word description for #2 cars is "excellent”

True Grade 2 cars are generally less than 5% of a given population

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Grade 3 Car Defined by Hagerty as— •  #3 cars could possess some, but not all of the issues of a #4 car,

but they will be balanced by other factors such as a fresh paint job or a new, correct interior

•  #3 cars drive and run well, but might have some incorrect parts •  These cars are not used for daily transportation but are ready for a

long tour without excuses, and the casual passerby will not find any visual flaws

•  "Good" is the one word description of a #3 car

The vast majority of the PCA member cars fall into this category

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Condition 4 Cars Defined by Hagerty as— •  #4 cars are daily drivers, with flaws visible to the naked eye •  The chrome might have pitting or scratches, the windshield might be

chipped. Paintwork is imperfect, and perhaps the fender has a minor dent.The interior could have split seams or a cracked dash

•  No major parts are missing, but the wheels could differ from the originals, or the interior might not be stock

•  A #4 car can also be a deteriorated restoration •  "Fair" is the one word that describes a #4 car

The vast majority of the Porsche’s offered for sale in the marketplace are Grade 4 Cars

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Other Factors in Grading •  The standards fall gently over time in the #2-4 grades as

cars age. A #2 991 looks different than a #2 1969 911S •  A + or – can be given to any grade for a car that falls

in the middle •  Cars below 4 are evaluated on the costs to bring up to a

higher grade however all cars have a natural floor they don’t go below

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Original vs. Restored •  A truly original car will outperform a restored car ONLY if it

is truly #2 or higher grade example •  “Survivor”, “Barn Find” or “Patina” are over used, a car is

only a “Survivor” if it survived WELL! •  Restored cars generally still are #2-3 cars, the expense

and difficulty of a #1 restoration makes them very rare

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How to Set or Know a Fair Price •  It’s not an exact science •  Research comparable models for sale across all platforms •  Subtle differences make large value differences even

among the same model •  Take the time to study the market long term to learn the

subtle nuances, when in doubt consult an expert (or two!) •  Too high is just as bad as too low!

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The Problem with Value Guides •  The market is moving faster than the indexes can adjust •  Most sales happen without public disclosure •  The guides can only hit the averages, they don’t

accommodate for the outliers due to low sample size •  Best for average cars •  Useful: Hagerty.com, Excellence, NADA Classics

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Factors Affecting Price: Mileage •  In general the lower the mileage the higher the value •  Late model 1999+ mileage discrepancy is rare •  Older models: mileage discrepancy is common—

mechanical odometer failure, 5-digit odometers, 85 mph speedo (79-82)

•  Documentation is key •  Cars condition should be reflective of mileage •  1973 and older mileage is almost irrelevant as it relates to

market value •  Condition trumps mileage

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Factors Affecting Price: Rarity •  As a general rule lower production sub-models

command a premium •  True mechanically or visibly distinct sub-models

bring higher premiums than simply aesthetic or marketing packages

•  Some models were rare due to low desirability initially and often they are now “rare” but not necessarily desirable

•  Outliers: Special Wishes, racing history, celebrity ownership, prototypes, etc..

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Factors Affecting Price: History •  1 owner cars always bring a premium •  Low ownership is 2nd best •  Unbroken chain of Documentation •  States of Ownership: West Coast + Dry States

are preferred •  Clean title/Clean Carfax (only after 1980) •  Salvage title is always a significant hit to value

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Factors Affecting Price: Options •  Color is a huge variable. Color preferences have

changed over time •  The Color and options can make as much as a 1-2x

difference in price on certain models •  In general the more highly and unusually optioned a car the

more desirable. Performance options generally have a higher return on value

•  Prior to PDK era Tiptronic and Sportomatic brings lower values

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Factors Affecting Price: Condition •  What grade is the vehicle? •  Condition of the Body, paint and interior? •  Mechanical Condition: PPI •  What items need to be remedied to bring the car up to a

given grade? These are not a $ for $ deduct on value •  Presence of accessories: Tool kits, air pumps, window

sticker, books, spare keys, etc.

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Factors Affecting Price: Originality •  The more original the more valuable and the

easiest to sell •  Modifications that are easily reversible with original parts

saved is 2nd best •  Improve your sales price and decrease market time by

returning to original if possible •  Non-reversible modifications drastically lower values and

desirability (as it relates to a sale, its YOUR car make it the way YOU want it!)

•  The lower the grade the lower the difference originality makes

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Factors Affecting Price: Paint •  Cars with original paint are always more valuable

unless condition is degraded beyond a tolerable level •  The higher the number of painted panels the bigger the

value deduction, always attempt to learn “Why” •  A total repaint is judged on the merits of its quality •  Most sellers claim original paint however they have no way

of verifying. “Looks Original”

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The Paint Meter •  Air-cooled cars were painted by hand, as such the readings

have greater variability •  Water-cooled cars were painted robotically, have a much tighter

range of acceptable values •  The key is consistency across all surfaces. Air-cooled cars

should read between 3.5–6.5 mils on every panel. Water-cooled between 4–5.5 mils

•  If given a high reading look for evidence: tape lines in jams, rough edges on backs of panel, overspray, color match, incorrect texture, etc.

•  Factory QC, Port damage, lot damage •  Paint meter does not negate need for thorough body inspection

but certainly helps!

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Value vs. Price •  Value is what you get in exchange for the price you pay.

Value doesn’t mean less expensive •  The more expensive car might be the better “Value” •  In general buy the best car you can afford, but be careful

you are getting what you pay for •  The best value is the car the best suite your needs, desires

and intended usage. •  When in doubt enlist the help of a trusted advisor

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Where to Find a Used Porsche / Where to Sell a Used Porsche •  PCA: Network amongst your local club members, the best

cars are usually found this way •  “Reputable” Dealers: We didn’t get the bad

reputation for nothing! •  Don’t assume a private party is necessarily more

honest (honesty vs. ignorance) •  Auction- Proceed with caution…. •  Know Your Audience

•  Online venues: PCA.org, Autotrader.com, Craigslist, Pelican Parts, Early S Registry, 356 Registry, 6-speed online, Rennlist.com, BringaTrailer.com, eBay

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Payment: Buying or Selling •  Everyone is concerned about Fraud •  Cash over $10,000 is a no-no •  The concern about Cashier’s checks •  Wire Transfer •  In Person Transfer •  Title: Make sure they have it, its in their name and

there is no lienholder •  When in doubt visit your local DMV with the buyer or seller •  Lien: How to payoff an outstanding loan