A VINTAGE INVESTMENT WITH THRILLS

As prices continue to rise, classic motors could be the ultimate investment vehicle, but have the enthusiasts simply got carried away?

 
At the giddy top end of the market, there seems no limit to what collectors will pay for their ultimate classic car. With prices climbing an astonishing 47 per cent last year, what was once a hobby suddenly started to seem like a dream investment.
 
“The return can be astronomical. Classic cars have outperformed the FTSE by a considerable percentage in the last five years,” says Marcus Atkinson of classic car insurers Hagerty International. “People are choosing to invest disposable money in cars, fine art and wine. You can’t show off a certificate of stock market results, but you can show off an Aston Martin DB5. With cars, there’s a certain element of nostalgia but you can also drive them, touch them, smell them, feel them.”
 
Exemption from capital gains tax and continued low interest rates make classic cars even more attractive. “Ultimately any market is about supply and demand. There’s a finite supply of collectors’ motor cars and presently a healthy appetite for them,” points out James Knight, Bonhams Global Head of Motoring.
Recent high profile sales include a 1954 Mercedes W196 that fetched almost $30 million (£19 million) last year, and a 1997 McLaren F1 GTR Longtail which went for $5.28 million (£32 million) in January. Expectations were off the scale when a certain 1962 Ferrari 250 GTO was auctioned by Bonhams in August, and the hammer came down at $38 million (£23 million) that day in California –less than many expected.
According to an index of classic cars compiled by Historic Automobile Group International (HAGI), the market has indeed slowed – growing by a modest 8.42 per cent for the year to July. But while recent years have been reminiscent of the classic car boom of the late 1980s (prices fell steeply in the early 1990s), experts remain undaunted.
 
“I don’t think it’s going to crash as before, because this time people are buying with cash instead of borrowing,” explains Atkinson. “They say ‘I’ve always loved that car. If I get a good return, that’s just the icing on the cake’. Different areas of the market are coming into play – South America, the Far East and China.”
 
While the old classics – the Ferraris, Aston Martins and E-Type Jags – continue to appreciate in value, the rally cars of the 1980s are attracting more attention. It’s the modern collector cars which are being courted by the next generation – the likes of the Ford Sierra Cosworth and the BMW M3 Evo,” says Atkinson. “A 1985 Audi Quattro Sport SWB Coupé sold for £115,740 at Goodwood Revival last year.”
 
Sports racing cars of the 1950s that are equally at home on road or track are also performing well, according to Knight of Bonhams: “They’re a ticket to some of the world’s greatest events such as the Mille Miglia Retrospective, Le Mans Classic and Goodwood Revival.”
 
Of course, a six figure sum is far from essential to land a vintage motor. An MG Midget can be bought for £3,000 to £4,000 and a Triumph TR4 for less than £20,000. The dream for many is a ‘barn find’, in need of care after decades languishing in a garage.
 
At Classic Motor Cars in Bridgnorth, Shropshire, Peter Neumark oversees the restoration of Jaguars and other vintage motors. It typically costs around £150,000 to restore an E-Type, and 60 per cent of his cars are exported – to Europe, the Middle East, Australia and North America.
 
“It was not always the case that you could put money into a restoration and get a return on your investment, but these days you do,” he says. “We try to make the restoration process enjoyable for our clients. They’re involved in the specifications, the colour, the trim, and if they want we’ll give them tasks to do in the workshop. Anything is possible. A Texan client asked us to stretch his E type by 4.5 inches.”
 
Sadly, car investment funds have yet to take off. One of the latest projects is the PHD Classic Car Fund. Launched earlier this year by PHD Equity Partners, they require a minimum investment of £50,000.
“It’s been a very buoyant market, and we’re trying to give people exposure to that, but with the added benefit that they can use the cars – rather like a prestige car club,” explains investment associate Keith Benson. “We want to invest in cars worth £250,000 to £400,000 – the ones that qualify for high end events like Goodwood Revival. These are the models that attract value.”
 
They are yet to raise the £2 to £2.5 million need to start investing – possibly because wealthy enthusiasts tend to own their own vintage cars.
 
Dietrich Hatlapa, a former banker and founder of the Historic Automobile Group, sounds a note of caution, pointing out that cars that do well in a rising market are more vulnerable in periods of decline. “They do not compare to mainstream investments, and are highly illiquid,” he warns. “You should buy with your heart, not to boost your wallet.”
 
That said, he believes it is possible to use classic investment strategies. “Look for cars in sectors that have underperformed, such as Mercedes Benz and Porsche. It’s also worth looking at the performance of individual cars, like the Aston Martin V8.”
 
Ferraris have risen most steeply, with prices going up by 62 per cent last year alone. “Prices are very much determined by rarity. Ferraris were built in much smaller numbers than Jaguar, but If you want to enjoy driving a car, why not buy a car that’s been built in larger numbers?“ suggests Hatlapa. “We recommend you get involved in the sector before buying a car, maybe join a classic car club and go to events. If you’re an enthusiast, by all means invest in cars, but if you’re not, find something you’re passionate about.”
 
Events this month:

International Autojumble at Beaulieu Motor Museum, 6-7 September (see beaulieu.co.uk)

Goodwood Rivival, 12-14 September (see grrc.goodwood.com)