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Want to invest in classic cars? You could be on to a winner

28 June 2016

10:49 AM

28 June 2016

10:49 AM

I have a confession. I’ve been unfaithful with a Spanish beauty I met on the internet a few weeks ago.

All my life the object of my desire has been home-grown. I was born in the same place as Aston Martin (the unassuming north Buckinghamshire town of Newport Pagnell) and my loyalty never strayed. Until now.

I was doing some research for a magazine that Knight Frank publishes in Spain and it just happened. I came across the Pegaso Z102 and it took my breath away. I’m not sure even the feline lines of the iconic DB5 can compare.

Perhaps it was the exoticness that did it for me. Fewer than 100 Pegasos ever roared out of the Barcelona factory where they were made between 1951 and 1958. Aston Martin is still going, but as with other super-car marques the current cars don’t seem to have the magic of yesteryear. The allure of the mystical Pegaso is frozen in time.

Classic cars are like that, they capture the imagination like no other investment of passion. The noise of their snarling engines, the smell of oil and leather, their racing pedigrees and the allure of glamorous former owners all combine to form a potent cocktail that persuades people to part with tens of millions of pounds for the most sought-after machines.

It helps to explain why classic cars lead the Knight Frank Luxury Investment Index (KFLII), our most glamorous piece of research, which tracks the performance of 10 investable luxury asset classes, and which I’m lucky enough to compile.

Over the past 10 years to the end of March, the value of cars, as measured by the index, has increased by a staggering 467 per cent. Wine and art cross the finishing line a distant second and third, with respective growth of ‘just’ 245 per cent and 206 per cent.

To give this performance a property perspective, the Knight Frank Prime Central London Index, which tracks the top of the capital’s luxury residential market, has risen by only 111 per cent over the same period.


Luxury Index Cars

So what should you buy if you want to invest in classic cars?

Well, Ferrari really does dominate the starting grid. Earlier this year a stunning 1957 335 Sport set a new world auction record (in sterling and euro terms at least) when it went under the hammer in Paris for €32.1 million, the equivalent then of £24.7 million.

Sixty other cars have broken the £5 million barrier at auction and almost 70 per cent have had a prancing stallion on the bonnet. Up until the introduction of the Dino, Ferrari produced a very limited series of hand built-cars that all had a strong racing pedigree. As a result they are highly collectable – only 14 365 California Spyders were ever produced – making them a magnet for well-heeled collectors.

These cars will likely always command premium prices when they come up for sale, but the wider classic car market has actually dropped down a gear or two of late. Even though KFLII shows annual growth has been a very respectable 17 per cent, average prices have been treading water since the beginning of the year, with some models actually falling back slightly.

classic cars

A number of auctions in the UK and Monaco this year have also seen many lots fail to sell, begging the question: is this a bubble beginning to burst?

Those in the industry that I speak to say not, it’s more a market letting off steam. Expectations had been driven up too high for cars that were not especially rare or in authentic condition and buyers now prefer to take their time – why pay over the odds at an auction when you may get the car of your dreams via a dealer for less money?

But let’s be honest, what I’ve been talking about so far is the very top of the market – a rarefied place that very few of us will be lucky enough to inhabit. The HAGI Top Index that we use to track the classic car market is based on the value of 50 of the world’s most desirable and rarest cars, so the supply and demand equation is always likely to support price growth.

In this world of post-referendum uncertainty, we may even see another spike in values as people look for tangible assets to invest their cash in, especially if they are overseas buyers who can take advantage of sterling’s fall from grace.

However, away from the Concours d’Elegance, more everyday models, the cars that some of us drove in our youth, are steadily rising in value. Mark 1 Golf GTIs in good condition are making good money, while MGB Roadsters and Lancia Delta Integrales are highly collectable.

The trick is to buy what you love, drive it, treasure it and enjoy the ride. If one day you can sell it for more than you paid for it that’s a bonus, plus there won’t be any Capital Gains Tax on the profit to hand over to the Government. You can’t say that for boring old equities.

But I think I may have made a mistake. I’ve just seen an Aston Martin DB4 Zagato. Now that is a seriously beautiful car.

Andrew Shirley is Editor of The Wealth Report at Knight Frank

 

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