Most classic car aficionados hope to own at least one head-turning heritage vehicle at some stage – for nostalgia for a bygone era, emotional reasons or because they are viewed as a status symbol. Classic cars are not just a ‘passion’ hobby, however – they can also be a good investment. How should first-time buyers approach the collectable car market? Are there any pitfalls to be aware of?
There are many reasons for buying a classic car. According to global property advisory company Knight Frank, which produces an annual ‘luxury investment index’, the main reason why people purchase any scarce luxury item is quite simply the joy of ownership. The second is capital appreciation, the third the provision of a safe haven for capital investment, the fourth is investment portfolio diversification, and the fifth is status among peers.
Classic cars can certainly be an excellent investment. Over the past two decades, the market for these vehicles has experienced a consistent rise and, according to Knight Frank, the value of the classic car market internationally has over the past 10 years appreciated more than that of watches, wine, jewellery, stamps, and art.
Not all cars are equal
What is the best way to approach the classic car market, especially if you are a newbie investor in this asset class? The first thing to note is that not all cars are equal when it comes to investing in the classics, and not all are good investments. It takes deep knowledge of the industry and a lot of homework to know which ones will appreciate in value. Investment cars vary dramatically in price tag and returns, depending on their rarity and condition, and the size of the buyer’s pocket.
The more knowledgeable you are about the heritage, history, and demand for various marques, the better prepared you will be. The internet is a great place to start but speaking to other collectors and car enthusiasts is also a must – you can learn from both their successes and mistakes. And know that sometimes it does involve luck. Most of the cars that will be great investments in years to come will be so in part due to unforeseen changes, for example, the introduction of electric cars and emissions taxes.
Generally speaking, when it comes to the ultra-rare collectable cars sold for eye-watering prices on auction around the world, the prices very much depend on what buyers are willing to pay, as well as the provenance – or story – of a particular vehicle. True collectors understand the journey of each vehicle, and most of the investment cars being bought and sold around the world today have a story. For example, a 1965 Shelby 427 Cobra sold for $5.94 million on auction in January 2021 – it fetched this price partly because it was Carroll Shelby’s personal Cobra that he owned until his death in 2012.
Marque is key
The million-dollar question is, of course, which brand to invest in: Jaguar, Ferrari, Mercedes, Porsche, or Lamborghini – the list is endless. The key is to get a vehicle from a good marque before there is a great demand for that model. One that stands out far above any other when it comes to collectable status is Ferrari. To date, 59% of the classic cars sold at auctions for more than $5 million have been Ferraris.
A potential opportunity may in fact be a pre-millennium V8 Ferrari, perhaps a 308 GTB/GTS or F355 Berlinetta/Spider, of which South Africa still has some fine examples. On average these two models have fallen 25% from their peak in 2016. Designed by the master Leonardo Fioravanti, they exhibit the kind of class and timeless curves that are synonymous with Ferrari. While they are not quite in the league of a Dino or a Lusso, these younger classics seem poised to flourish.
A winning combination
Scarcity remains one of the most important factors in appreciating prices in classic cars. Every classic car that is left to rust, or is scrapped or shipped abroad, leaves a gap that cannot be filled. Limited production numbers, along with good looks, beautiful contours, a matching engine, chassis numbers and components, original paint and upholstery, and low mileage, are a winning combination.
To avoid future pitfalls, you should be on the lookout for rust, do regular maintenance, replace perished parts with original parts, and try to acquire a car with low mileage. Besides the initial cost, you also need to plan for taking care of and protecting your classic car, which includes some kind of real estate to house your vehicle, and reliable insurance. And you also need to drive your car from time to time!
Many of the collectors I know still own their most valued investment vehicles and will in all likelihood never sell them. In my view, you should not be aiming to buy a collectable car to sell it for a higher price later – you should be more concerned about whether the vehicle will hold its value into the future. The added benefit is that you will be able to experience the pleasure of either looking at it, driving it or simply smelling the petrol fumes.
Investing in classic cars can be an exciting and extremely rewarding venture, but it is not for the faint-hearted. These beautiful machines can take you on great ups and downs and bring back memories of past eras. But they are also an asset class that can be analysed like any other, and it is in the finest details where the rarity lies, and the real value emerges.
Leon Strümpher, portfolio manager at Sanlam Private Wealth.