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The Insider’s Guide to Investing in Classic Cars

The fact that classic cars make sense for the so called “passion investor” is hardly news; The trusted Knight Frank luxury index highlight returns of up to 500% for those who have picked the right cars over the past decade, fueling a market that is witnessing more and more investors looking for a decent return. Besides the obvious financial benefit, classic car expert John Simister believes that the reason why classic cars have become a popular passion investment is due to the fact that “classic cars are objects we can all relate to, be it memories of the past, appreciation of objects made in ways not used today, the enjoyment of using them, maintaining them, socialising with other owners”.

So when did it all start? According to Douglas Azar, founder of Wealth-Initiative, “passion investing” started around 15 years ago. Back then, the line between collectors and investors was a bit blurry. The unusual low-interest rate environment, the volatile equity market and a depressed oil price has made the search for diversification in the financial world a crucial necessity.

“Passion investments” such as art, classic cars, vintage watches, rare stamps or any other sought-after collectibles could well play the role of portfolio diversifier as well as a safe haven in times of extreme stress in the financial world. In fact, acccording to Deloitte, the global market for passion investments is expected to reach USD 621 Billion by 2017.

He continues with explaining that there is an increasing trend of “collecting-investing” where high net worth individuals favour investments that will not only yield them a decent return over the long term but will also give them some enjoyment in the meantime. The combination of the two aspects makes passion investments a particular asset class.

It is important to remember, though, that just like with any other traditional investment opportunity, there is always a financial risk involved. In order to keep the risk of losing money as low as possible, ensure that you are picking the right classic car, ideally accident-free and in top condition. When it comes to investing in classic cars, you want to be looking for classic and vintage cars that are between 30 to 40 years old.

We have lined up a few “blue chip” cars reserved only for those willing to seriously invest into classic cars:

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Douglas Azar

Douglas Azar is the founder of wealth-initiative.com, which is a secured digital platform aimed at facilitating transaction within wealth management institutions client base in order to match buyers and sellers in an efficient way. The wealth initiative categories include real estate, art, passion investments (such as classic cars) and business deals.

1. Would you advise investors to purchase a classic car, even if they are not particularly interested in cars?

“I would not particularly recommend investing in classic cars if one is not knowledgeable on the specificity of the asset class and the various parameters surrounding its fluctuation in price. Many other efficient investment vehicles would offer kind-of-similar payoff. One has to be passionate about cars to invest in them and collect them. Passion should definitely come first. In a different approach, an investor could pick a classic car fund to diversify his investment and give the management of the assets to professionals.”

2. Is specific market know-how necessary in order to invest in a classic car?

“it depends on how one would like to invest. When collecting classical cars, one has to know exactly what he is doing in terms of what brands, models and years he is investing in. Knowledge is key to making the right investment. It is a specific sector and it takes time to get around it. The collector who is not in the game to make profits could be.”

3. What do you need to keep in mind when buying a classic car?

“Investing in classic cars do not come without pitfalls. The main ones are; liquidity (it could take a great amount of time to sell), time horizon (it is a long term investment and turnover should be low) and high transaction fees (the main auction houses will on average charge 10% to the seller and 20% to the buyer). The cost of “holding” classic cars include storage, maintenance, insurance and represents on average an additional 2% per year of the asset value. They also generate no dividend income, so all the return has to come from price appreciation net of costs. All that said, investing in classic cars is a great thing to do and will bring great lots of joy.”

Graham Eason

Graham Eason is Managing Director of Great Escape Cars, UK's largest classic car hire company operating from its base in the Midlands. His background is in branding and identity, small business management, marketing innovation, product and service launches and sustainability

1. Would you advise investors to purchase a classic car, even if they are not particularly interested in cars?

“Yes. In a way, it is almost better that they aren’t emotionally engaged with the car because you need to make pragmatic decisions when investing. If you love cars then this becomes harder. The usual rules apply, though – be clear why you’re making the investment and what you expect to achieve, take careful advice before buying a particular car and understand the risks associated with classic cars and certain models. But if you can think that clearly and have a love for cars, you’ve got the best of both worlds and can enjoy the rewards of classic car ownership.”

2. Is specific market know-how necessary in order to invest in a classic car?

“Yes. If you don’t feel you have this, find someone who does. While certain models and makes may be safer investments than others, individual cars may not fit the profile. Provenance, condition and the quality of previous repairs can all seriously affect a particular car’s investment potential.”

3. What do you need to keep in mind when buying a classic car?

“On paper, certain cars can look like they have great investment potential. But you need to buy wisely: restoration costs can quickly exceed the value of the car, swallowing up any profit and pushing you quickly into a loss. Even if you are knowledgeable I recommend having someone on hand to prevent emotion overtaking rational decision making. If you’re buying a classic as an investment you need to consider your payback period. For example, some cars like the Aston DB7 represent a long-term investment potential. Others, like the Aston DB6, are a short-term opportunity as they are arguably much closer to their peak value. Be clear about your objectives, particularly the balance between dispassionate and passionate investment, and ensure you have a good supplier network around you to assist with good quality maintenance and repairs.”

Filippo Pignatti

Filippo Pignatti started a Classic Car fund and is CEO of the Zurich-based Custoza Family, an independent multi-client family office based in Zurich. The Custoza Family take care of all client interests and needs in a holistic and comprehensive manner. This includes the evaluation, management and ongoing monitoring of clients assets worldwide.

1. Would you advise investors to purchase a classic car, even if they are not particularly interested in cars?

“Ironically, not being passionate about cars may prove an advantage if you are simply looking at the car as an investment "vehicle". It may offer you an edge in considering your purchase without bias and with a view to its generational interest, previous results and hence how easy it will be to resell. On the other hand, a deep understanding and knowledge of the classic car market whilst hard to attain is naturally priceless and this is usually only gained by having followed your favourite marques over the years.”

2. Is specific market know-how necessary in order to invest in a classic car?

“As above and for any investment, prudence and research are recommended. TCCF offers a safety net for those wishing to dip a toe into this sector and enjoy the performance (and in some cases drive the cars) without having to worry about storage, maintenance, insurance and administration of vehicles.”

3. What do you need to keep in mind when buying a classic car?

“There are plenty of potential tripping points when purchasing and lots of different reasons for a purchase, each needing different buy priorities. TCCF grades cars prior to potential purchase and looks for already restored and in general peak of condition cars save for those that have an exceptional provenance and further historical value. Many purchase to restore for example or to complete a collection and these would all require different variables. For investment purposes, judging upcoming trends such as iconic young timers or perhaps the next Ferrari to gain recognition in the market are handy insights to have tuned before searching for your next piece of petrol history.”

John Simister

John Simister, a motoring writer since 1984, writing for autocar.co.uk, the independent.co.uk as well as autoexpress.co.uk.

1. Would you advise investors to purchase a classic car, even if they are not particularly interested in cars?

“Yes, but only if it’s a high-value car with a track record of market demand and is in excellent condition in every way.”

2. Is specific market know-how necessary in order to invest in a classic car?

“Yes, especially if you are tempted by a car not in the category in the answer above. Some of the biggest returns can be made by identifying a car which is currently undervalued and whose value may well rise dramatically, but this is a high-risk approach for which market knowledge is vital. You don’t necessarily need this knowledge yourself, but you need to know and trust someone who has it.”

3. What do you need to keep in mind when buying a classic car?

“Once you have decided what type of car you want, which ought to be a decision of the heart much more than with a modern car, do lots of research: buying guides, past road tests, websites. Inspect a car thoroughly - take an expert with you if necessary - and don’t be blinded by desire when you look at the first car in your search for the right one. The market places great value on originality, unbroken history, correct and authentic parts and low mileage.The best investment cars score well here. A really good original car, even with some patina, will always attract more interest and a higher price than one which has been so comprehensively restored that little or none of the original car’s surfaces remain. Bear in mind, too, that cars which have been used regularly will always drive better than those that have been stationed for long periods. So, if you want to enjoy driving your potential investment you have to strike your own compromise between enjoying your purchase on the road and keeping its mileage down.”

Steve Linden

For over 25 years, Steve Linden has been serving the needs of classic car collectors, enthusiasts and investors and is an expert when it comes to classic and vintage vehicle services. His wide range of services will help you get the most out of your passion for vintage automobiles.

1. Would you advise investors to purchase a classic car, even if they are not particularly interested in cars?

“Purchasing a classic car on its own may not be a sound investment for the same reason that purchasing an individual stock is risky. You might get lucky and the classic car might increase in value. But, given the thousands of different makes and models and years of classic cars available on the market, it is unlikely that you would get lucky by purchasing one classic car. As with any market, understanding the investment is of paramount importance. If an investor is aware of the investment potential of classic cars, desires to invest in that sector, but does not have a knowledge or ability to purchase and care for a classic car, then a classic car fund would be a preferred approach for an investment of this type.”

2. Is specific market know-how necessary in order to invest in a classic car?

“I think that specific expertise about any market is important when considering an investment. Many investors do not have this know-how and that is why experts exist in virtually every sector in which one might potentially invest. As applies to classic cars, not only is an in-depth understanding of the market trends and values critical but so is the knowledge about the cars themselves. Nuances abound and the value lies in these nuances.”

3. What do you need to keep in mind when buying a classic car?

“If you would like to buy a classic car for enjoyment, do so! If you buy a good car, you might even make a few dollars. But in addition to the cost of the car, be sure to factor in the cost of storage, insurance, maintenance, repairs and the opportunity cost of the money that has been spent on the car. It is not unusual to find that these costs can exceed the purchase price of the cars in a relatively short period of time.”

Stuart Masson

Stuart Masson, Owner and Editor of one of the finalists of UK’s national blog awards 2016, thecarexpert.co.uk, providing impartial car buying advice, as well as news and information from all over the automotive world. Stuart has had a passion for cars and the car industry for over thirty years. He spent a decade in the automotive retail industry and now works tirelessly to help car buyers with independent and impartial advice.

1. Would you advise investors to purchase a classic car, even if they are not particularly interested in cars?

“Not every old car will appreciate in value to a significant degree and the costs of maintaining an old car will be significantly higher than other investment options. So, it may not be wise to invest in a classic car purely for financial gain. It’s far better if you are actually going to use and enjoy your classic car, with the possibility of it appreciating in value over time.”

2. Is specific market know-how necessary in order to invest in a classic car?

“Absolutely. As mentioned, not every old car is going to become a ‘classic’. Some cars were bad from new and haven’t got any more desirable now that they are old. Knowing what sort of car to pay and how to ensure it is properly maintained is essential if you want to earn a profit from your investment.”

3. What do you need to keep in mind when buying a classic car?

“If you have a significant amount of money to invest and are looking at blue chip classic cars like old Ferraris, the market is currently very good. But there is no guarantee this will continue – classic car values have risen and fallen over the years like many other investments. Values for classic Ferraris were very high in the late 1980s, then plunged along with everything else after the Wall Street crash of 1987. It’s only in recent years that value has exceeded those 1980s prices. If there is another market fall, classic car values may well suffer once again.

The best advice for most people is to buy a classic car that you will use and enjoy. If it is a car you have admired for a long time, there is a good chance that others will have too and the values will be more likely to increase over time, but this is not guaranteed. There will also be significant costs along the way and you will have to spend money to maintain the car properly, which is essential to ensure its value is as strong as possible when you come to sell it.”

Keith Riddington

Keith Riddington, a classic motor specialist with unrivaled knowledge and dedication to the classic car market. Keith is an author, public speaker, business consultant and highly regarded expert on Aston Martin motor cars and general classic motor vehicles.

1. Would you advise investors to purchase a classic car, even if they are not particularly interested in cars?

“Classic cars are a very good option, but it must be driven by the head and not with the heart. Investing in the wrong classic car bit back if not careful. The right car in the right condition will reward your time, so advice from an expert is 100% necessary in all cases.”

2. Is specific market know-how necessary in order to invest in a classic car?

“Yes every way, it helps if there is a little understanding, but market know-how and understanding is a great advantage.”

3. What do you need to keep in mind when buying a classic car?

“Check the markets, the trends the downfalls with some cars. Limited number cars, hand built cars and most desirable or the ones to focus on. If you have no understanding, do your homework, speak to owners clubs and read the classic car magazines.”

James Ruppert

James Ruppert, Editor of Freecarmag.com, has been a motoring journalist since the 1980s and wrote more than 15 books. He is also a columnist for various Car Magazines including Supercar Classics, Classic Car weekly, Car week and more.

1. Would you advise investors to purchase a classic car, even if they are not particularly interested in cars?

“No, that is buying a classic car for all the wrong reasons. It is impossible to stop anyone from doing that, but this is how classics disappear into private collections and may rarely be driven again. That’s bad for classics cars and the classic car enthusiasts.”

2. Is specific market know-how necessary in order to invest in a classic car?

“If you are buying purely to invest then, it is. People should always buy a classic car because they want to enjoy it. The money is irrelevant. A buyer should be able to afford every penny they pay for a classic car and still be able to smile.”

3. What do you need to keep in mind when buying a classic car?

“Never buy a restoration project unless you realise it will probably cost twice any realistic quote to make roadworthy. Only buy a car you will enjoy driving, so hire or borrow an example to try first. Learn as much as you can about the classic and look at as many as you can before buying.”

We would like to thank all 8 experts who have contributed to this article.

 

For those of you who are truly considering investing in classic cars, we’ve put together an interactive table revealing the financial performance of the top 100 individual classic cars which have recorded the biggest shifts in value over the last six years (Source: Classic Management).

The complete table with all vehicles can be embedded on your website using the code below.

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