Ac­cel­er­at­ing in­vest­ments

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Buy­ing clas­sic cars, by Aurora East­wood

In the past decade, the FTSE 100 has been more in­de­ci­sive than a well-heeled lady in front of a stand of Jimmy Choos, the prop­erty mar­ket has swung to and fro as wildly as a mem­ber of the Bulling­don club hang­ing from a chan­de­lier and the cur­rency mar­kets have played a game of tag. One thing has out­per­formed them all – out­per­form­ing, in fact, ev­ery­thing. not gold, not bonds, not farm­land but clas­sic cars; 487% over the past decade, ac­cord­ing to the His­toric Au­to­mo­bile Group In­ter­na­tional (HAGI), an in­de­pen­dent in­vest­ment re­search com­pany, with the Top In­dex listed on the FT web­site.

This sec­tor of in­vest­ment, known as in­vest­ments of pas­sion, have mas­sively out­done the more tra­di­tional main­stream as­set classes and some buy­ers have seen spec­tac­u­lar gains – even this writer, see­ing one strate­gic buy dou­ble in value in a sin­gle year. The Knight Frank Lux­ury In­vest­ment In­dex (KFLII) sur­veyed its ul­tra high net worth clients and has cal­cu­lated that more than 61% of re­spon­dents re­port in­creas­ing in­ter­est in clas­sic cars.

Why has the clas­sic car mar­ket seen such huge gains? Rea­sons are myr­iad. In no par­tic­u­lar or­der, the list in­cludes: En­joy­ment. A car is a tan­gi­ble cre­ation, in three di­men­sions, that breathes fire and roars might­ily. A beau­ti­ful piece of art is a won­der­ful thing but all one can do is gaze upon it. It cer­tainly can’t be grabbed by the scruff of the neck and flung around a race cir­cuit or be driven to a beau­ti­ful stately home, parked on the lawn and be pic­nicked around. You can’t drive a paint­ing to the South of France and take in a cu­rated five­day tour, sur­rounded by a close group of like­minded in­di­vid­u­als. Peo­ple who buy clas­sic cars are pas­sion­ate about them.

“They are car en­thu­si­asts, they buy them and they rocket up in value,” says Adrian Hamil­ton, owner of Dun­can Hamil­ton Ltd,

Clas­sic cars are prov­ing to be a long-last­ing suc­cess for in­vestors look­ing to en­joy the fruits of their labours, writes Aurora East­wood

one of the most im­por­tant dealers in the en­tire clas­sic car world.

Scarcity. In the case of clas­sics, there were x num­ber of y car made. The more pres­ti­gious y is and the lower x, the rarer and more valu­able they will be. And they don’t have to be from the 1960s, ei­ther. Look at the Ferrari 288 GTO. Built for the Group B rally series that was axed be­cause it was too fast (ergo dan­ger­ous) in the mid 1980s, only 272 cars were made. Cost­ing around £73,000 at the time, these cars are now eas­ily fetch­ing £1.5 mil­lion and will con­tinue to go north. The Ferrari 250 GTO Ber­linetta is an­other ex­am­ple. “Pur­chased in the 1960s for 25,000 lire – then around £1,400, equiv­a­lent to around £22,000 to­day – it sold in 2014 for $38.115 mil­lion, set­ting the world record for the most valu­able car sold at auc­tion,” said James Knight, Bon­hams In­ter­na­tional Group mo­tor­ing direc­tor.

Lack of al­ter­na­tive op­tions. With in­ter­est rates so low, and other as­set classes so volatile, where else to park one’s money? His­tor­i­cally, clas­sic cars have per­formed so well there seems lit­tle rea­son for a sud­den down­turn. In the worst case sce­nario, if all the mar­kets crash and val­ues are wiped off ev­ery­thing, at least you can drive your 288 GTO down to the cor­ner shop and buy some bread. You can’t do that in your eq­uity port­fo­lio.

This isn’t to say that things won’t slow in the short term, as the mar­ket has eased over the past year. HAGI shows a slight cool­ing, with 16% growth in 2014 com­pared to a huge but un­sus­tain­able 47% in 2013. This re­ally rep­re­sents a more bal­anced mar­ket, ac­cord­ing to HAGI’S founder, Di­et­rich Hat­lapa.

Who is buy­ing these cars? Adrian Hamil­ton made an in­ter­est­ing point.

“Euro­peans and Amer­i­cans have his­tory with, and obsession for, the au­to­mo­bile. They are col­lect­ing cars they re­mem­ber from when they had short trousers and posters on bed­room walls. Most are be­tween 40 and 55, buy­ing cars from the ’70s and ’80s.” He went on to say, “Rus­sians, In­di­ans, Chi­nese – they just aren’t as into it – they don’t have the same his­tory with the mo­tor car.”

Knight ex­plained why the clas­sic car mar­ket is not as vul­ner­a­ble as the FTSE or other in­vest­ment ar­eas – it’s down to the buy­ers. “Over the dis­tance, own­ing a col­lec­tors’ mo­tor car has al­ways shown a re­turn. The mar­ket is pri­mar­ily un­der­pinned by col­lec­tors and en­thu­si­asts – not spec­u­la­tors and in­vestors – which is a good thing. Spec­u­la­tors thrive on in­sta­bil­ity. Col­lec­tors en­joy own­er­ship and cher­ish their cars. If they can get their money back, even make a re­turn, that is great.”

What cars should in­vestors be look­ing for? In part, it de­pends on the bud­get and how much they want to spend. “There are many fac­tors that can af­fect cost: make, model, rar­ity, provenance and, of course, con­di­tion. You can spend any­thing from a cou­ple of thou­sand to a few mil­lion on a col­lec­tor’s car, it re­ally de­pends what you like and how much you’re will­ing to spend. The good news – and some­thing that read­ers find sur­pris­ing be­cause of the press reports of record prices – is that the hobby is ac­ces­si­ble to pretty much all,” ex­plained Knight.

There are gains to be made at al­most ev­ery level but you need to know how to pick them.

Cheap: from £5k. Ni­cholas Marg­eri­son, a for­mer Bon­hams clas­sic car con­sul­tant who now ad­vises pri­vate clients, rec­om­mends the Golf GTI Mark I or II, the clas­sic 1980s hot hatch. “Get a low mileage, un­re­stored ex­am­ple with per­fect, un­mo­lested in­te­rior trim. You will pay for that. A hoot to drive but be­ware – many went back­wards through hedges back in their day!”

Not so cheap: £30-£60k. Max Wake­field, co-founder of Chilling­ham Clas­sics, an En­ter­prise In­vest­ment Scheme to in­vest in clas­sic cars, rates BMWS. “A 2002 turbo is now worth £60,000 plus, de­pen­dant on con­di­tion. Or a 3.0 CSL, these are now chang­ing hands for £100k but you might find one at the £55k mark.”

Also in this zone is the first Ja­panese su­per­car, the Honda NSX, as tipped by Marg­eri­son. “It was de­vel­oped in con­junc­tion with Ayr­ton Senna. The engine is its forte.” From £40,000.

Mid range: £100,000 to £300,000. In this range it has to be the As­ton Martin V8, built from the late ’70s to 1989. It’s just about pos­si­ble to get one for £80,000 but, more re­al­is­ti­cally, £150,000 up­wards. The V8 Volante “Prince of Wales” is the most sought af­ter, with only 22 built and com­mand­ing al­most £500,000. Just down from that

the Volante “X Pack”. “Find a Van­tage Volante (con­vert­ible) X-pack V8 with a man­ual gear­box,” says Marg­eri­son. “If you can.”

Once the col­lec­tor has cho­sen what to buy, he or she is then faced with cer­tain choices. The first and most im­por­tant is where to store the car, re­gard­less of whether it will be driven or not. Older cars do not take kindly to be­ing left out in the rain and must be kept in­doors, ideally in a hu­mid­ity- and tem­per­a­ture­con­trolled en­vi­ron­ment. There are ded­i­cated stor­age fa­cil­i­ties, such as Hamp­shire Clas­sics, which is based on an or­ganic farm in Hamp­shire. In an un­pre­pos­sess­ing farm build­ing, its con­tents only be­lied by a plethora of se­cu­rity cam­eras and im­pres­sively strong doors and locks, sit count­less cars of all ages and val­ues, many co­cooned in spe­cial in­flat­able pods, all con­nected to the life sup­port of a trickle charger. Costs start at £30 per week (for pe­ri­ods of six months plus) and rise to £35 per week plus VAT if the car needs to be “car­cooned” – or more if extra ser­vices are re­quired, such as ex­er­cis­ing the car and so on.

The next choice is whether the car is go­ing to be used. Sadly, many are bought and don’t turn a wheel – but for those who don’t mind putting a few more miles on the clock, the op­tions are both end­less and fun. His­toric ral­lies, own­ers’ club events, track days (for the brave) or his­toric rac­ing (for the ul­tra brave). Be­ing in­vited to dis­play one’s car at a pres­ti­gious car show such as Wil­ton, Chol­mond­ley or Good­wood is an hon­our and a great op­por­tu­nity for po­ten­tial buy­ers and car afi­ciona­dos to see these won­der­ful ma­chines .

Above: a Gold­en­eye for profit – cars like Bond’s iconic DB5 or a Ferrari 355 can make huge gains

CARS: TO DO AND NOT TO DO

DO check the paper­work. Care­fully re­search the his­tory of the car and check and recheck the ve­rac­ity of the doc­u­men­ta­tion.

DO buy some­thing you like – the chances are if you like it, so will other peo­ple when it comes time to sell.

DO buy the very best ex­am­ple you can find for the money you have, in the best con­di­tion, the least miles, the most his­tory. DO en­list an ex­pert to ap­praise the car be­fore you buy – some re­pair jobs may cost more than the car is worth.

DO your re­search into what cars hold value bet­ter than oth­ers. Hours of good-qual­ity re­search will pay div­i­dends.

DON’T ex­pect a clas­sic car to drive like a modern one – don’t com­pare them at all. Driv­ing a clas­sic car is a unique ex­pe­ri­ence, be it noisy, bouncy, vague or ter­ri­fy­ing – but it is won­der­ful.

DON’T buy a restora­tion job – much bet­ter to buy some­thing that some­one else has spent the money restor­ing.

DON’T ex­pect a guar­an­teed re­turn. Some cars go up, some are static, some go down. Trends come and go and val­ues can change. DON’T as­sume that just be­cause some mod­els of a fa­mous mar­que have done well, that all the oth­ers will, too. Some are cheap for a rea­son. DON’T spend money you can’t af­ford to lose or you may find your­self sit­ting at the con­trols of an ex­ca­va­tor while try­ing to bury a Ferrari. Above left: Ferrari 288 GTO. Be­low: 1983 Volk­swa­gen Golf GTI. Above right: A 1907 Rolls-royce Sil­ver Ghost and the last Cor­niche to be built at Crewe. Far right: Honda NSX

TOP 10 MAR­QUES

FERRARI – still the daddy but prices have al­ready risen hugely.

PORSCHE – try and pick the next movers – 996 turbo, per­haps?

MERCEDES – two-door con­vert­ibles but pick the right decade.

BMW – M3s are go­ing up, CSLS, too – this mar­que is on the move.

JAGUAR – E-types still go­ing strong but they made other cars, too.

ALFA ROMEO – beau­ti­ful, Ital­ian, iconic. The Spy­der as seen in The Grad­u­ate.

AS­TON MARTIN – the ul­ti­mate in Bri­tish cool. Don’t hang around…

BENT­LEY – an­other ut­terly Bri­tish brand of wafty lofti­ness.

ROLLS-ROYCE – the Cor­niche con­vert­ible: ex­cep­tional build qual­ity.

MASERATI – nu­mer­ous beau­ti­ful cars made over the decades.

Be­low: Jaguar E-type coupé at Cow­dray House Be­low right: The Lady, a 1933 3.5 Derby Bent­ley

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