The Economics of Everyday Things - 8. Delaware License Plates

Episode Date: July 3, 2023

Vanity plates might be 2KUL4U, but in the Blue Hen State, low-digit plates command high-digit prices. Zachary Crockett sums up a big market in a small state.

For most of us, a license plate number is a random, forgettable, jumble of letters and digits. It serves no purpose other than identifying our vehicles to cops and DMV employees. But in the state of Delaware, the right license plate number is a valuable asset. Would you trade your license plate for a brand new Porsche? No. Would you trade your license plate for a million dollars? No. Two million dollars? Maybe.

For the Freakonomics Radio Network, this is the economics of everyday things. I'm Zachary Crackett. Today, Delaware license plates. US states began issuing license plates in the early 1900s. They were a way to keep track of a growing fleet of automobiles. And Delaware was among the first to mandate them. The blue-headed state distributed black porcelain plates in numerical order. Numbers 1, 2, and 3 were reserved for Delaware's governor, lieutenant governor, and secretary of state.

And many of the next low-digit tags went to politicians and prominent families. Number 4, for instance, it went to the commissioner of the Delaware State Highway Department. The former mayor of Wilmington got number 40, his sister got number 30, and his chauffeur got number 60. Over time, license plates have become a status symbol in Delaware society. But what if you didn't happen to be a member of the Delaware elite at the turn of the last century? Well, luckily for you, this is America, where there are very few status symbols that cannot be bought.

Delaware allows its residents to transfer their license plate numbers to other drivers. And this has created a market for the most desirable tags. These days, when someone wants to buy or sell a license plate, they turn to Aaron Dundphy. I run low-digit tags, basically a marketplace for Delaware license plates. Dundphy came to Delaware in the 90s and found work at a Mercedes dealership. He began to notice that a lot of the customers were more interested in the license plates than the cars.

Everybody was asking around, hey, where can I get a black tag? And I thought of the idea, you know what? Maybe I should start posting some ads in the classified section of the local paper. So I started spending quite a bit of money, almost $300 a week, just putting wanted low-digit tags. I started getting phone calls left and right. Dundee set up a website in 2005. And since then, he's arranged the sale of more than 2000 low-digit license plates. On lowdigit tags.com, you'll find more than 50 license plate numbers

for sale, ranging from $1,200 for a five-digit to $65,000 for the number 979. The process is simple. Let's say you have plate number 52 and you want to sell it. Dunphy runs a search for some recent comparable sales and comes up with a list price. Then he goes through his role at X to see if any high-flying license plate buyers are interested. Once an offer is made and accepted, the buyer and seller go to the DMV to transfer the title. And this is where Delaware has a bureaucratic advantage.

You can go to the DMV and you can have the tag transferred from one person to the next within minutes as soon as you get to the person at the desk. With some of the other states, it takes almost nine months. What you're paying for when you buy a low-digit tag is not the physical license plate itself. That's essentially worthless. You can go on eBay and find old out-of-commissioned Delaware tags for ten bucks. The value is in the number and the right to display it on your vehicle. There are only nine single-digit plates in existence. There's no zero plate. In a given decade, you might only see

one of them come up on the market. And Dunfee says the next one to hit the auction block would go fast, even with an asking price that would fund most Americans' retirement. It could probably be about five phone calls that I make, and my guess is it would be sold within the hour. Sometimes a plate sells for a higher price because it has sentimental value to a buyer. I've sold license plates because of birthdays, addresses, divorce dates. I mean, you name it any type of number that might mean something to a lot of people out there bring a lot more money. Demand for these tags is no joke. In a 2020 working paper

from the National Bureau of Economic Research, economists pinned the total value of Delaware plates from the numbers 10 through 9,999 at $2227 million. That's nearly six times the operating budget of the Delaware DMV. So who would buy a license plate number for several times the median annual salary? That's coming up. A lot of low-digit plates in Delaware are worth much more than the cars they're attached to. Some of them are worth more than the average home price in Delaware. So, if you are looking to buy, you've got to have a healthy bank account. Well, my father-in-law started purchasing tags in the late 60s,

started out with three digit and a couple four digit tags. And it just over the years became a passion. That's Frank Fisalo the third. He's a retired real estate developer, the second of three generations to run a company called Fusco Management. Local strip shopping centers, you know, fast food, supermarket, CVS, Walgreens, stuff like that. All in Delaware. Fasallo's father-in-law, Anthony Fusco, started the business back in 1965. And when he struck it rich, he decided to treat himself to something he'd always pined for, a low-digit Delaware tag.

He bought his first plate, number 477, for 800 bucks. From there, it quickly became an obsession. He's a numbers guy. I mean, with business and, you know, he likes to gamble a little bit, so numbers are a big part of that. He was kind of taken in by the black and white old tags in the history with them and, know just started getting them. Okay, just started getting them as a slight understatement. Vesalos' family now owns what is probably the largest collection of low-digit license plates in this state. In 1994, Fusco acquired number 9 for $185,000 and put it on his white Mercedes. The family snapped up number eight in a private sale.

And in 2008, Vosalos' son spent a record setting $675,000 on number six at an auction. I was actually in California on the phone with him as the bid was going on. And my son kept saying, hi, am I gone? I said, I'll tell you when to stop. I'll tell you when to stop. I'll tell you when to stop. Aaron Dunphy says you would have to bid even higher today. Single digits, if one became available, it would really sell close to $1 million.

Two digits over the past two years. They've probably sold anywhere from low hundreds to over 400,000. Three digits, there's been some that have sold as reasonable as 30,000 up to some that have sold well over 100,000. According to Frank Vesalo, in total, his family has spent around $2 million on over a dozen plates over the years. When you have that kind of money tied up in license plates, you have to be extremely vigilant

about renewing your registrations. If you miss one, the DMV has the right to release it to the public after 12 months. And there are license plate vultures waiting to pounce at the opportunity. Either they have friends at DMV or they're there and they see the tag is expired and jump right on it. His family makes sure to put them to use. We have all the tags in a separate corporation and most of the family members have them on their cars.

You know, that becomes the issue. If you have 15 tags, you need 15 cars. So, you know, my niece is nephews, my father-in-law. And what kind of car do you have it on now? I have nine on a Bentley. Nice. That's a car that's worthy of the special tag. Yeah, exactly. And Delaware, having a low-digit tag on your car

makes you a celebrity. A lot of people ask if they could take a picture of the car and the tag. I just got one pulling up here. There's road construction and all the guys stopped, but they were doing one to look at the car in the tag, so this is interesting. This is part of the allure for the buyers of low-digit tags. The plates are a way of saying, not so subtly, yeah, I'm rich.

You know, it always had a status symbol. If you had a low license plate, either a politician or a big wig in town. I mean, it's a Delawareian type of thing. The market for low-digit plates may be mostly a Delaware thing, but it's popped up in other places too. In Dubai, someone shalt out $14.3 million for plate number 1 in 2008. A few years later, number 5 fetched 9 million. And in China, a bidding war for the plate 999 got so intense that it turned into a bloody

brawl. Expensive license plate numbers are a perfect example of what economists call a veblin good. That's a luxury item where the high price is a part of the appeal. Functionally, there are no different from any other license plate. It's their scarcity that gives them value. But Duffy says that a low-digit plate is also an investment, like fine arts or a piece of real estate.

Everybody always says, why would you spend that much money for a tag? Well, if you'll buy a car, you're losing 20-30% right away, whereas if you have a tag, most likely it's going to be appreciating over time. On average, over a long term, you're at about a 9% annual return. That 9% return figure is based on very limited data. After all, tight supply is what makes these things so highly valued in the first place. But that doesn't mean it's far off.

Plate number 20, for instance, went for $5,000 in 1958. 60 years later, it sold for $410,000, meaning its value grew by 7.6% per year. To be fair, you'd have done a little bit better in stocks, but for licensed plate collectors, all of this is beside the point. Most people don't get rid of them unless there's no more family in the state and they don't really have anybody to give it to, so they're selling it because they're moving. Do you ever see plates end up in divorce settlements?

Yeah. I've been in the courtroom a few times, but happens quite a bit. Dundee also says that low number license plates are one of the most hotly contested items in trusts and wills. The license plate is probably one of the first things that they usually handle. A lot of times the siblings want. The license plate so it ends up having to almost go into an auction set up. They want to see what the market brings for the tag.

This is something Vassalo has had to consider. Between playing rounds of golf in California and fishing for Mahi Mahi in the Bahamas, he has drawn up a careful plan for the afterlife of his license plate collection. Hopefully it'll just stay in the family and go to my kids and green kids for generations. For the economics of everyday things, I'm Zachary Crackett. This episode was produced by Sarah Lilly with help from Lyric Boudich and mixed by Jeremy

Johnston. We are a part of the Freakonomics Radio Network. If you'd like to learn more about the peculiar goings-on in Delaware, check out the recent episode on Freakonomics Radio called Why Does One Tiny States Set The Rules For Everyone. See you next week! You ever like pull up to someone to stop light and say, hey man, you want to solid your license plate? I mean, like if I see it on a car that's just in the parking lot or something I might leave a card. The Frekenomics Radio Network. The hit inside of everything. Steve Accord.