The Aug. 24 Gooding & Co. car auction at Pebble Beach, Calif., has vintage Aston Martins, antique Bugattis, and supercharged Mercedes. It also has a BMW sports sedan from 2002 that looks suspiciously like a car your neighbor bought new and is still driving 16 years later.
The 2002 BMW E39 M5 sedan, which had an original MSRP of about $72,000 to $75,000, carries an auction estimate of $140,000 to $180,000, or about 1,100 percent higher than the current Kelley Blue Book valuation, which tops out at $15,630.
The reason that this car is valuable, and the ways in which that value is determined, says as much about how the collectible car market is structured as it does about the inherent qualities of the car itself, says David Brynan, a senior specialist at Gooding & Co. “The collectible market is driven by insiders, and they assign value to things,” he explains.
“Right now, there are a lot of people who collect BMWs, and for them, this [2002 M5] is the holy grail.” (A review of the 2000 model in Motor Trend magazine called it “the greatest super-sedan ever produced.”)
This particular BMW was purchased by a man in Rancho Santa Fe, Calif., who bought one M5 to drive and a second to preserve. It’s barely been driven at all: The odometer has just 437 miles on it.
“For BMWs, the criteria is really how original they are, because there are plenty of them out there that were driven and used as regular cars,” Brynan says. “It’s basically a new car.” It still has its pre-delivery inspection stickers and its new car check-in sheet; even the license plate bracket is still in its wrapper.
A BMW sedan from the early 2000s is being auctioned with a high estimate of $180,000 https://t.co/XBKIDiaGyx
— Bloomberg (@business) August 17, 2018
Not All Cars Are Created Equal
Of course, not all cars are created equal; a like-new 1996 Dodge Neon would not command a similarly dazzling six-figure price.
This BMW’s newness, in contrast, carries such cachet because in the last three years its cult status has risen dramatically.
“There are very few cars that are built from new and intended to be collectibles,” Brynan explains. Like the BMW M5, most cars’ status is developed over time. “They’re introduced, they depreciate, and then people realize that they’re special, and they slowly begin to appreciate,” he says.
There aren’t precise numbers as to how many of the 2002 E39 M5s were produced, but the consensus is that there were just under 10,000 sold in North America during its 1999-2003 production run.
This particular model’s popularity began to surge as people began to realize that it represents the last “fully mechanized experience,” says Eric Keller, founder and owner of the Enthusiast Auto Group, a Cincinnati-based dealer and shop that specializes in BMWs. There’s minimal computer interference in the driving experience; as opposed to newer models whose horsepower, steering, and stability are modulated by an onboard computer, the E39 M5s were much more reliant on the driver’s control. It’s even the last M5 built with a dip stick. By 2006, the V10-powered M5s’ oil level was checked electronically.
“I’ve sold about 400 of these in the last 15 years, and all have been the 2002 or 2003 model year,” Keller continues. “Those two years are the most desirable.” (In 2006, BMW introduced the E39’s replacement, the E60 M5.)
Keller echoes the sentiment that the car’s newness is the primary driver of its value, but adds some qualifiers: There’s also its original finishes, which on one level are an asset (“You don’t want a piece of artwork that’s been touched up by three people after the original artist”), but which, because of the particular popularity of the silver-on-black combination, render the car less valuable than a different color scheme would command.
“Let’s say this car, for conversation’s sake, sells for $150,000,” Keller says. “If it was alpine white on black, it would sell for $220,000; if it was blue on caramel, it would sell for $200,000; if it was black on black, it would sell for $160,000.”
Making Up for Lost Time
So: The BMW is one of the last examples of its type of driving experience—and a spectacularly preserved example at that—but that still doesn’t fully explain its relatively newfound status as a cult object.
For that, Keller says, you have to consider the car’s target demographic. “The era of car up to the mid-2000s has been booming over the last two or three years,” he says, “because all the guys buying these cars either had one back then, or really wanted one back then and couldn’t afford it.”
Keller says that nearly 80 percent of the people who buy E39 M5s from him owned one, used it as a daily car, and then sold it. Since then “they’ve owned a new M5, or a [Mercedes] AMG product, or a Tesla, and they find themselves measuring their driving experience with an analog one,” he says. The comparison, Keller continues, is rarely favorable, and so they find themselves trying to buy back a 2002 or 2003 model.
For those who vainly coveted one of the cars in their teens and 20s, “now they have the disposable income and can finally buy it,” he says. “Most of the people buying those are between 42 and 60 years old.”
Establishing a Market
For all that, the market for the 2002 and 2003 M5s has a long way to go. The Gooding & Co. BMW is, by very dint of the fact that it’s untouched, a clear market outlier.
Including it in the auction could be perceived as a clear attempt by the auction house to raise the model’s perceived value. “It’s not something, let’s say, that we’re intentionally doing, and it can be certainly be seen that way,” Brynan says. “I think it will ultimately establish that market for what this cars sells for.”
Still, he cautions, unlike a particularly coveted vintage car that people would take in any condition, “we’re not going to go out and consign an average, run-of-the-mill version of it,” he says.
Keller says that he assumes the car will sell, at minimum, for $100,000 to $120,000. “I’d be surprised if it does less than that, and frankly, I don’t think it will, because I’ll be in the room,” he says. “I’d be bidding to buy it.”
The car represents a shift in the way people assess car values, Brynan says. “It’s very different from the 1950s and 1960s [vintages], where you’d buy a low-mileage car because you knew it hadn’t been used much, so it had life in it,” he says. “But now, it’s sort of like a contest to see how low a mileage car you can have.”
That change, he says, is the sign of a generational shift.
“It’s gone in a direction plenty of old-school car collectors don’t totally understand,” he says. “But there’s a lot of new people who are into it. It’s a big difference in priority.”
This article was provided by Bloomberg News.
