EXPERT INSIGHTS ON INVESTING IN CLASSIC CARS

As 2020 rolls in, you might be considering investing in a classic car. Here are some expert thoughts to ponder before you make any hasty decisions you might regret

OVER THE past few years, there has been a rise in the number of investment opportunities for people with financial resources to spare – everything from small start-up tech businesses to cryptocurrencies in the form of Bitcoin.

If you have money, there are many ways to invest, but buying a car certainly won’t be be advised as a good way to ensure capital returns.

RISE OF THE COLLECTIBLE

Cars lose value the moment you drive them out of the showroom, and that’s particularly the case with most mainstream new cars.

But there are cars that appreciate in value, earning you a decent return. These can be new, but most probably come from the past, when manufacturers weren’t strangled by regulations.

Although it’s difficult to know which vehicle is guaranteed to offer a return, you can make calculated estimations based on a little due diligence.

WHAT AN EXPERT SAYS

David Crossley, the business manager at BDO Wealth Advisers, says the world of collecting is fascinating – there’s hardly an item, however arcane, that someone somewhere does not have an interest in collecting.

“There are people who collect stamps, cigarette cards, beer bottles and even comics.”

Crossley says the world of collectors of classic cars and classic motoring memorabilia has moved from compulsive hoarding to that of a lucrative investment prospect.

In the past 20 years, the trend has gone from a small group of enthusiasts to a multimillion US dollar industry, encompassing businesses dedicated to acquiring and restoring desirable automobiles, to wealthy individuals who amass a collection of exotic and rare vehicles purely from a lucrative investment point of view.

“In the UK, the US and in Europe, the sheer quantity and scale of this business of collecting is mind-boggling, and values over the years have shot up, particularly in respect of the more exotic and scarce marques,” he says.

HOW DO YOU PLAY THE GAME?

We asked Crossley how a person with limited means might invest in the lucrative market. As with any foray into a specialised investment niche, there are plenty of caveats that can trip up the unwary and inexperienced investor.

“If you plan to buy a vehicle for future investment and are not familiar with values and saleability, it is best to do intensive research or engage the services of someone in the know, before you make that purchase. Remember, emotion can often override common sense and that old classic might bring you nothing but heartache.”

Consider these pointers before you buy:

Check the general condition of the car from a mechanical and body point of view – costs to refurbish the items could far exceed the investment value of the car. Have an experienced, mechanically-minded person check over the vehicle. If there’s far too much wrong with it, walk away and find something else.

People will try to sell an old car under the pretext that it is worth a lot of money because of its age. Don’t be persuaded. Check classic car sources (magazines, Marque clubs and websites) to determine the going prices.

Ask if its a “matching numbers” car. This means the engine and body are as they left the factory – this is an important factor in determining future investment values.

Ask whether it has been brutally modified. An old Rolls-Royce with an American V8 installed and modern mag wheels will look tacky and require sympathetic and costly refurbishment to restore it to investment potential.

Ask if the registration is in order. If the car is what is termed a “Barnfind”, in that it has not seen the light of day for a while, then registering the car without the original ownership papers could prove to be a problem.

Consider the provenance. A vehicle that has an ownership history incorporating a celebrity or famous public figure will have a value that is considerably enhanced, but check that it is a genuine provenance, or you could end up paying too much. A RollsRoyce that was once owned by Sir Elton John, could add as much as a 20% premium on the selling price.

Consider the make and model. Values of classic cars vary according to the model. For example, an Aston Martin DB6 will command a price 50% less than an Aston Martin DB5, even though they are similar. This is because the DB5 became an icon after it featured in many of the early James Bond films.

Assess the vehicle’s scarcity. Some cars, such as the Lamborghini Miura, have rocketed in value due to limited supply and are sure to continue rising in value exponentially. The fact that they are indifferently built and horrendously expensive to restore and maintain will be overlooked in terms of their investment potential.

“Be a little hard-headed about your purchase and restoration expenditure if you are buying for investment purposes,” Crossley says.

If you are an enthusiast and want to buy for the personal joy and satisfaction of owning an iconic vehicle from another era, then you might not mind buying with your heart, but beware – what starts out as a romantic notion could become a financial and mechanical liability and a heartbreak.

“You must be resilient and be prepared to get your hands dirty from time to time,” Crossley says.