Has the clas­sic car price bub­ble burst?

CLAS­SIC NEWS/ After the value hikes of re­cent years, soft­ened prices have made clas­sics more of a col­lec­tor’s mar­ket again, writes Stu­art John­ston

Business Day - Motor News - - PRE-OWNED NEWS -

In re­cent months there has been much talk about clas­sic, vin­tage and col­lectable cars not fetch­ing the prices they were a year or so ago. This fol­lows a huge ramp-up in col­lectable car prices in the past four or five years, where clas­sic cars were be­ing touted as the best in­vest­ment on the planet, out­strip­ping the likes of col­lectable art and prop­erty by some mar­gin.

The ques­tions we put to ex­perts was whether prices are in fact down, and whether clas­sic or vin­tage cars were still to be seen as good to ex­cel­lent long-term in­vest­ments.

Brian Noik, of Old­cars.co.za, has been trad­ing in vin­tage, vet­eran and clas­sic cars for the past two decades, and is him­self a col­lec­tor of some fine vin­tage ma­chin­ery, in­clud­ing a 1913 Buick. “There has def­i­nitely been a soft­en­ing of prices in the past year,” he says.

“Spec­u­la­tors have fallen off the boat, and it is be­ing driven by a col­lec­tor’s mar­ket again. There is plenty of in­ter­est, but the cars are only sell­ing if they are re­ally well priced, and also if they are top notch ex­am­ples. Of course, the en­try-level clas­sic cars al­ways sell, and on the other side of this coin, the re­ally top stuff al­ways sells. The top Fer­raris, Porsches, WO Bent­leys [cars from the late 1920s and 1930s], Rolls-Royces, E-Type road­sters, that sort of stuff. There will al­ways be a mar­ket for th­ese top-drawer col­lecta­bles.

“At the lower end of the mar­ket there has been move­ment in Toy­ota SR5s from the late 1970s, Golf GTis and MGBs and this is great be­cause it is draw­ing the young­sters into the clas­sic car scene. A lot of th­ese cars are driven by nos­tal­gia, for ex­am­ple the Opel Su­per­boss — a young­ster may have had posters of th­ese cars on his wall when he was at school, and now he is hell-bent on find­ing one.”

Paul Ken­nard, founder of SA’s premier clas­sic cars com­pe­ti­tion, Con­cours South Africa, says there are a lot of eco­nomic fac­tors that af­fect both the sales of new cars and clas­sics.

At the top end of the mar­ket, prices for new sports cars such as Porsches and Fer­raris are high and you won’t make any money on in­vest­ing in a new ex­otic, at least in the short term.

“With the older ex­otics, cars of 20 or 30 years old, it’s all about your rea­sons for buy­ing it, what you are go­ing to sell it for, and what the rand is do­ing at the time you want to sell the car.

“And then you cou­ple all that with avail­abil­ity, be­cause there are not that many truly col­lectable cars in this coun­try. All th­ese fac­tors af­fect the price and it’s sup­ply and de­mand at the end of the day,” Ken­nard says.

Is rar­ity the key to wise in­vest­ing?

“Peo­ple col­lect clas­sic cars for a num­ber of rea­sons. Some buy them purely for in­vest­ment pur­poses, park them and hang on to them as they ap­pre­ci­ate in value,” says Ken­nard.

“Glob­ally there are a lot of car col­lec­tions, but in SA be­cause of the lim­ited num­ber the prices tend to be a lit­tle bit higher. You can buy clas­sics over­seas but you still have to ship them here and pay du­ties and taxes. Th­ese vary, de­pend­ing on what the car is. Even old cars at­tract du­ties.”

Cur­rently th­ese taxes are pegged at about 30% for cars that are 40 years or older.

Ken­nard, who has traded for a num­ber of years in col­lectable sports cars, ac­knowl­edges that there was a huge spike in clas­sic car prices a few years ago. “The prices of clas­sics went re­ally, re­ally high, re­ally, re­ally quickly. As an ex­am­ple, I bought my Fer­rari Tes­tarossa for less than R1m, I had it for eight years and I sold it for R1.6m. I thought that this was great, I had en­joyed the car im­mensely, put a lot of mileage on it, and owned it for what I con­sider are the right rea­sons — which is driv­ing th­ese clas­sics.

“And then two years later, that was sud­denly a R4m car! So the prices jumped ex­po­nen­tially. Then prices lev­elled out for a bit — I’m talk­ing Fer­rari par­tic­u­larly here, it’s my sphere of pas­sion — and now they are ac­tu­ally com­ing down in price.

“There are a lot of fac­tors with any col­lectibles. You have to do your re­search, you need to buy some­thing that has value and is likely to in­crease ap­pre­cia­bly in value. This doesn’t ap­ply to all clas­sic cars, so it is im­por­tant to track the rise in val­ues of a car you have your eye on.”

Noik says that in the lower, more af­ford­able end of the clas­sic car mar­ket, there seem to be trends that come and go.

“At the mo­ment it is VW buses, or Kom­bis as we call them, and they have been hugely col­lectable for some time. A few years ago it was the Citroen DS model that was sought after, be­fore that it was Jaguar Mk II sa­loons. If a car has been in a movie, you see a huge spike in de­mand. Now Fiat 500s are sought after.”

As far as the in­vest­ment fac­tor is con­cerned, Noik ar­gues that there is al­ways a risk of some­thing go­ing wrong on a car that is 40, 50 or 60 years old. But he says if you buy a de­sir­able car, there is al­ways some­one else that is go­ing to want that car from you.

Ken­nard says it is worth point­ing out that even if you are go­ing to buy it and park it, there is still some rather in­ten­sive main­te­nance to con­sider.

“You can’t sim­ply start th­ese cars up ev­ery month or so and rev the en­gine a few times; you have to drive them get the oil cir­cu­lat­ing, get the ex­haust sys­tems up to tem­per­a­ture, work the brakes. They are like horses or hu­man be­ings, they need ex­er­cise to stay healthy, and if you are es­tab­lish­ing a large col­lec­tion, then you are look­ing at em­ploy­ing a staff of ex­perts to look after your fleet of clas­sics.”

What about the sort of clas­sic you should buy? Should you buy the ex­am­ple in the best con­di­tion pos­si­ble, or should you opt for a barn-find?

“It de­pends on your mo­ti­va­tion,” says Ken­nard. “My ad­vice is to buy the best ex­am­ple you can, if that is the car you want. When it comes to restora­tion this can be very ex­pen­sive. And restor­ing a clas­sic is also a thorny sub­ject. First prize would be to buy a pris­tine, un­touched orig­i­nal ex­am­ple, un­re­stored, be­cause th­ese are the most valu­able if they are in good, com­plete con­di­tion.

“Some­times th­ese aren’t avail­able in the model you are after, so you might need to buy a car that needs some restora­tion work. Ob­vi­ously the qual­ity of the restora­tion work to be done is im­por­tant, so do your re­search, get hold of the mar­que club for your car, ask ques­tions be­fore you spend a lot of money on a car that might need lots of work done, at spe­cial­ist prices.”

The clas­sic car field is di­verse, and the def­i­ni­tion of what con­sti­tutes a clas­sic car varies from year to year, and from com­mu­nity to com­mu­nity.

In re­cent years there has been a huge run on cars like Volk­swa­gen Kom­bis from the 1950s through to the late 1970s. VW Bee­tles of sim­i­lar vin­tage are be­com­ing col­lectible too. Kombi prices went sky high a few years ago, and a per­fect ex­am­ple of a 23-win­dow “Samba” Delux bus from the late 1950s will sell for R1m. Prices for the sec­ond-gen­er­a­tion Bay Win­dow buses range from R50,000 for a scrappy one to R150,000 for a pris­tine ex­am­ple, a huge ramp-up, con­sid­er­ing you could buy them for be­tween R15,000 for a scrappy one to R50,000 for a pris­tine one just four years ago.

The same trend has hap­pened to Ford Es­corts, which in Mk I GT form or Mk II 1600 Sport form are now fetch­ing well over the R120,000 mark.

Cars that are still af­ford­able but are ex­pected to have sub­stan­tial price hikes in the next few years in­clude the long­nosed Mini 1275 and GTS ex­am­ples. The rea­son for this is that all the early-gen­er­a­tion round­nose Mi­nis have al­ready been snapped up by col­lec­tors.

Many ex­perts pre­dict a rise in prices for the hum­ble, first-gen­er­a­tion Citi Golf which ap­peared in late 1984, early 1985. Mk I Golf GTis in good con­di­tion are vir­tu­ally un­ob­tain­able but if you hap­pen on have a pris­tine Mk II Golf GTi, you can al­ready ex­pect to pay be­tween R100,000 and R120,000, with prices ris­ing rapidly over the next few years.

As for an Opel Su­per­boss, a 1990 cult clas­sic, ex­pect to pay more than R200,000 at least.

THE CLAS­SIC CAR FIELD IS DI­VERSE, AND THE DEF­I­NI­TION OF WHAT CON­STI­TUTES A CLAS­SIC CAR VARIES FROM YEAR TO YEAR

Rare cars like this Rolls-Royce Phan­tom II re­tain their in­vest­ment value due to sup­ply and de­mand.

Ex­perts pre­dict a sharp rise in prices for the hum­ble, first-gen­er­a­tion Citi Golf which ap­peared in late 1984, early 1985.

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