COLLECTING
How rare and classic cars could find a place a diversified portfolio
The future of the motor car may be in some doubt, but a passion for automobiles is one that continues to unite tens of millions of men – and a sizeable number of women too. That’s hardly surprising, for few could fail to be stirred by the sublime beauty of a Bugatti, the majesty of a vintage Rolls-Royce or the sheer animal ferocity of a Lamborghini.
No matter how much people may love the automobile, though, it’s rarely made sense as an investment. In most cases, the value of a brand new vehicle will plummet by as much as one-third the moment it’s been registered and then driven out of the showroom and on to the road. Hold on to that car for five years or even longer and its monetary worth will likely end up being the merest fraction of what you paid for it.
On the other hand, there are cars that are old or rare, or both, whose value, perhaps having initially depreciated, is now on the rise. There are also even a few vehicles – limitededition machines such as the fabled
As an investment class, classic cars currently outstrip art, wine, coins, stamps and broad stocks by many a mile and, writes JON WALL, could have a valid place in a diversified portfolio
McLaren F1 or Ferrari’s more recent LaFerrari – whose value has never stopped rising since their owners took delivery of them.
In fact, collecting classic and rare cars is not only on the increase, but a garage or warehouse full of well-selected machines can serve as a valuable component of any investment portfolio – and it’s one that’s increasingly favoured by many high-net-worth individuals who are keen to diversify their holdings into an area that they also happen to be passionate about. It also comes with the added benefit that they can take their costly acquisitions out on the road now and again – provided, of course, that they don’t end up wrecking them.
Like any investment strategy it isn’t without risk – indeed, the pitfalls that any collector must negotiate are several – but with a growing number of ultra-rich chasing a proportionately smaller number of collectable motor cars, the figures and the potential speak for themselves. According to a recent Knight Frank Luxury Index report, the classic-car market currently
outstrips not only those for other collectables such as art, wine, coins or stamps, but also broad stocks. Moreover, the Historic Automobile Group International’s top index in 2019, which tracks the market’s most collectable automobiles – the likes of Ferrari, Porsche, Aston Martin, Alfa Romeo and Bugatti – found that values had increased by more than 500 percent over the preceding 10-year period, compared with an S&P 500 rise of just 60 percent.
The amounts involved, in fact, can be staggering. Only last summer, for example, a 1994 Le Mans-specification McLaren F1 supercar, one of only 106 examples built between 1992 and ’98 (when a “standard” F1 sold for around £650,000), achieved almost US$20 million at the RM Sotheby’s August auction at Pebble Beach, California. Other outstanding auction sales in recent years include US$13 million for a 1962 Aston Martin DB4 GT Zagato, US$21.4 million for a 1963 Aston Martin DP215 prototype, US$22 million for a 1956 Ferrari 290 MM and an astonishing US$48.4 million for a 1962 Ferrari GTO – all of which were sold at auction in 2018. In the same year, even a lowly 1973 Ford Escort Mexico – a slightly breathed-upon version of a humble family saloon – achieved £50,000 at Silverstone Auctions’ May sale.
Of course, collecting – and, more important, investing in – classic, rare or interesting cars isn’t simply a matter
of turning up at an auction and bidding. Yes, just as any self-respecting collector of art, watches or wine would do, as a car collector you should have at least some aesthetic appreciation of whatever it is you’re planning to buy, but if the aim is to build a collection that’s likely to appreciate substantially in value you’ll need to consider a whole lot more.
Beauty may well be in the eye of the beholder, but the global ranking of outrageously valuable automobiles contains none that are downright ugly – ergo, you should collect cars that look good. By the same token, the pedigree of a great designer, engineer or coachbuilder (and, even better, the combination of all three) is likely to be a bonus, as is whether or not that particular car represents a quantifiable advance in the automotive arts.
Other factors likely to enhance value would concern a particular automobile’s history: did it once belong, for example, to Gianni Agnelli or Elvis Presley, or was it victorious at Le Mans (or perhaps feature in Steve McQueen’s 1971 movie of the same name), in the Monte Carlo Rally or a similarly prestigious motorsport event? How many were made, and of those how many still survive? Condition comes into play, too, as does what might be considered its polar opposite, originality, for the less that’s been done
With a growing number of ultra-rich chasing a proportionately smaller number of collectable cars the figures and the potential speak for themselves
to a car since it left the factory, the better – and if it has undergone extensive restoration, it’s preferable that the work were done by a respected or “approved” operation, such as Ferrari’s Classiche division, which will also provide a certification of authenticity once the rebuild has been completed. At the opposite end of the scale are the so-called barn finds , rare automobiles that have been hidden for decades and then discovered quite by chance – such as the three abandoned Bugattis squirrelled away for more than 50
years by a Dutch artist that were found last year in Belgium.
As for the challenges, they include the necessity to ensure that your expensive purchase remains in tip-top condition and, as with all material goods that can deteriorate, this will by definition not be cheap. Even more costly, the car may need expensive restoration after you’ve bought it, not least if it’s one of those abovementioned barn-finds. Secure storage – especially if your collection comprises several automobiles – will also be costly, as will insurance. Also, as collectors’ tastes change, as they inevitably do, will the car you spent hundreds of thousands (and possibly millions) on still be considered so valuable in the future?
As with any other investment class, the classic-car market is susceptible to a variety of external factors, and values can drop as sharply as they can rise. Just as the financial markets crashed in the late 1980s, so the appetite for collectable cars dropped off a cliff in the 1990s, and though the market has shown remarkable resilience during the turbulence of the past 15 years (values actually increased by more than 20 percent between 2005 and 2010) there’s no telling how it will react to the current uncertain conditions caused by Covid-19.
If you’re mad about motor cars, then that may be sufficient to take the sting out of many of the pitfalls of classic-car ownership that you’re likely to encounter. At their best, rare automobiles inspire passion and love as few other objects can – and they can be hugely enjoyable to drive and own. Just remember that when things don’t go exactly as you’d planned them.
Values of collectable cars actually increased by more than 20 percent between 2005 and 2010